RLJ Lodging Trust (NYSE:RLJ), a real estate investment trust specializing in hotel properties, announced on Thursday an agreement to potentially sell up to $150 million of its common shares.
The Maryland-based company stated that the sales would be conducted through at-the-market offerings, which could include block trades or sales on the New York Stock Exchange.
The agreement involves multiple financial institutions, including Wells Fargo (NYSE:WFC) Securities, BofA Securities, and several others, acting as sales agents or forward sellers.
RLJ Lodging Trust has also entered into forward sale agreements with institutions like Wells Fargo Bank and Bank of America (NYSE:BAC), among others, which will sell borrowed shares corresponding to the forward sale agreements.
RLJ will not receive immediate proceeds from the sales of borrowed shares. Instead, the company plans to settle the forward sale agreements with cash or shares upon maturity, which may result in proceeds depending on the settlement method chosen. The equity distribution is part of a broader strategy to raise capital as needed in a flexible manner.
The sales agents are entitled to a commission of up to 2.0% of the gross sales price of all shares sold. Similarly, forward sellers will receive a commission, reflected in a reduced initial forward sale price, not exceeding 2.0% of the gross sales price of the borrowed shares sold.
The shares will be offered under RLJ Lodging Trust’s existing shelf registration statement and a prospectus supplement filed with the SEC. The company's counsel, Hogan Lovells US LLP, has provided legal opinions regarding the share offerings.
In other recent news, RLJ Lodging Trust has reported a 3.4% total revenue growth and a 2.6% increase in RevPAR for the second quarter of 2024.
The company attributes this success to strong performances in urban markets, the business transient segment, and a significant 6.5% growth in non-room revenues. In addition, RLJ Lodging Trust announced the acquisition of Hotel Teatro in Denver, marking progress in its 2024 conversions.
Baird, however, has reduced the stock price target for RLJ Lodging Trust to $11.00 from the previous $12.00, while maintaining an Outperform rating.
This adjustment comes as RLJ's fundamental performance, particularly from its urban properties and persistent challenges in Northern California, has not met expectations.
Despite these challenges, Baird still sees potential in RLJ Lodging Trust to perform better than the broader market. The company's updated full-year guidance reflects its readiness to navigate the softening economy, backed by a robust balance sheet and a focus on revenue management. The outlook includes hotel EBITDA between $382.5 million and $402.5 million and adjusted FFO per diluted share between $1.45 and $1.58.
InvestingPro Insights
In light of RLJ Lodging Trust's recent announcement to potentially sell up to $150 million of its common shares, it is noteworthy to consider the company's current financial metrics and market performance. According to real-time data from InvestingPro, RLJ Lodging Trust has a market capitalization of approximately $1.47 billion and is trading at a high earnings multiple with a P/E ratio of 36.25. Despite a modest revenue growth of 4.32% over the last twelve months as of Q2 2024, the company is trading at a low revenue valuation multiple.
InvestingPro Tips highlight that management's aggressive share buyback strategy may reflect confidence in the company's value proposition. Additionally, the company has maintained dividend payments for 14 consecutive years, with a current dividend yield of 6.45%, signaling a potential attraction for income-focused investors. Interestingly, analysts predict that RLJ will be profitable this year, which, coupled with a solid track record of profitability over the last twelve months, could reassure investors of the company's financial health.
For those seeking a deeper dive into RLJ Lodging Trust's performance and strategic outlook, InvestingPro offers a comprehensive list of additional tips. To explore further, visit https://www.investing.com/pro/RLJ for more insights and an array of data points that can help investors make informed decisions.
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