SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements generally are identified by the words "believes," "project," "expects," "anticipates," "estimates," "intends," "strategy," "plan," "may,"
"will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and
uncertainties which may cause actual results to differ materially from the forward-looking statements. A discussion of these and other risks and uncertainties that could cause actual results and
events to differ materially from such forward-looking statements is included in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this
Annual Report on Form 10-K. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Except
where the context suggests otherwise, we define certain terms in this Annual Report on Form 10-K as follows:
- •
- "our company," "we," "us" and "our" refer to RLJ Lodging Trust, a Maryland real estate investment trust, together with its
consolidated subsidiaries, including RLJ Lodging Trust, L.P., a Delaware limited partnership, which we refer to as "our operating partnership";
- •
- "our predecessor" collectively refers to RLJ Development, LLC, or RLJ Development, and two lodging-focused private
equity funds that were sponsored and managed by RLJ Development, RLJ Lodging Fund II, L.P. (and its parallel fund), or collectively, Fund II, and RLJ Real Estate Fund III, L.P. (and its
parallel fund), or collectively, Fund III, all of which were entities under the common control of Robert L. Johnson, our Executive Chairman;
- •
- "our hotels" refers to the 141 hotels owned by us as of December 31, 2011;
- •
- "our formation transactions" refers to a series of transactions in which, among other things, (1) our company was
formed, (2) our operating partnership was formed, (3) each of Fund II and Fund III were merged with and into our company, with investors in each of Fund II and Fund III receiving common
shares as consideration, and (4) RLJ Development contributed substantially all of its assets and liabilities to our operating partnership in exchange for units of limited partnership interest
in our operating partnership, or OP units;
- •
- a "compact full-service hotel" typically refers to any hotel with (1) less than 300 guestrooms and less
than 12,000 square feet of meeting space or (2) more than 300 guestrooms where, unlike traditional full-service hotels, the operations focus primarily on the rental of guestrooms
such that a significant majority of its total revenue is generated from room rentals rather than other sources, such as food and beverage;
- •
- a "focused-service hotel" typically refers to any hotel where the operations focus primarily on the rental of guestrooms
and that offers services and amenities to a lesser extent than a typical full-service or compact full-service hotel. For example, a focused-service hotel may have a restaurant,
but, unlike a restaurant in a typical full-service or compact full-service hotel, it may not offer three meals per day and may not offer room service. In addition, a
focused-service hotel differs from a compact full-service hotel in that it typically has less than 2,000 square feet of meeting space, if any at all; and
- •
- "TRSs" refers to our taxable REIT subsidiaries that are wholly-owned, directly or indirectly, by our operating partnership
and any disregarded subsidiaries of our TRSs.
We refer to the "RevPAR penetration index" of our hotels to measure each hotel's revenue per available room, or RevPAR, in relation to the average RevPAR of that
hotel's competitive set. Each hotel's competitive set consists of a small group of hotels in the relevant market that we and the third-party hotel management company that manages the hotel believe are
comparable for purposes of benchmarking the performance of such hotel.
Item 1. Business
Our Company
We are a self-advised and self-administered Maryland REIT that invests primarily in premium-branded,
focused-service and compact full-service hotels. We are one of the largest U.S. publicly-traded lodging REITs in terms of both number of hotels and number of rooms. Our hotels are
concentrated in urban and dense suburban markets that we believe exhibit multiple demand generators and high barriers to entry. We believe focused-service and compact full-service hotels
with these characteristics generate high levels of RevPAR, strong operating margins and attractive returns.
As
of December 31, 2011, we, through wholly-owned subsidiaries, owned 100% of the interests in 140 hotels and a 95% interest in one hotel. Our 141 hotels are made up of 20,646
suites/rooms and are located in 20 states and the District of Columbia.
We
intend to elect and qualify to be taxed as a REIT, for U.S. federal income tax purposes, commencing with the portion of our taxable year ending December 31, 2011. Substantially
all of our assets are held by, and all of our operations are conducted through, our operating partnership. We are the sole general partner of our operating partnership. As of December 31, 2011,
we owned, through a combination of direct and indirect interests, 99.2% of the OP units in our operating partnership.
Our Investment and Growth Strategies
Our objective is to generate strong returns for our shareholders by continuing to invest primarily in premium-branded, focused-service
hotels and compact full-service hotels at prices where we believe we can generate attractive returns on investment and generate long-term value appreciation through aggressive
asset management. We intend to pursue this objective through the following investment and growth strategies:
Investment Strategies
- •
- Targeted ownership of premium-branded, focused-service and compact full-service
hotels. We believe that premium-branded, focused-service hotels have the potential to generate attractive returns relative to other
types of hotels due to their ability to achieve RevPAR levels at or close to those generated by traditional full-service hotels, while achieving higher profit margins due to their more
efficient operating model and less volatile cash flows. We also may invest in compact full-service hotels which have operating characteristics that resemble those of focused-service
hotels.
- •
- Use of premium hotel brands. We believe in affiliating
our hotels with premium brands owned by leading international franchisors such as Marriott, Hilton and Hyatt. Within the focused-service category, we target hotels affiliated with premium brands such
as Courtyard by Marriott, Residence Inn by Marriott, Hilton Garden Inn, Homewood Suites by Hilton and Hyatt Place. We believe that utilizing premium brands provides significant advantages because of
their guest loyalty programs, worldwide reservation systems, effective product segmentation, global distribution and strong customer awareness.
- •
- Focus on urban and dense suburban markets. We focus on
owning and acquiring hotels in both urban and dense suburban markets that we believe have multiple demand generators and high barriers to entry. As a result, we believe that these hotels generate
higher returns on investment.