RLJ - RLJ Lodging Trust: Growing Topline And A Beneficiary Of Lower Rates

2024-03-28 11:29:44 ET

Summary

• RLJ Lodging Trust owns 97 hotels, with a focus on urban hotels in the Sunbelt region.
• RevPAR grew 9.2% in 2023, with a further increase of 4% expected for 2024.
• Adjusted FFO per share increased 22.1% in 2023 but is expected to be marginally lower in 2024 on higher interest rates.
• Net debt accounts for 49% of RLJ's enterprise value, with elevated leverage both a risk and an opportunity.
• The market cap rate of about 5.6% post capex spending, coupled with a growing EBITDA, creates a high single-digit return opportunity.

Introduction

RLJ Lodging Trust ( RLJ ) outperformed the Vanguard Real Estate Index Fund ETF ( VNQ ) over the past year, with hotel REITs delivering some of the strongest topline growth in the REIT sector, driven by an operational recovery following the COVID-19 pandemic:

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