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Analyst Blog

Bethesda, Maryland-based RLJ Lodging Trust (RLJ - Snapshot Report), a real estate investment trust (REIT), recently announced the acquisition of Hilton Garden Inn San Francisco Oakland/Bay Bridge hotel in San Francisco Bay Area market for $36.2 million. The hotels’ purchase price signifies a forward capitalization rate of around 9.4% on the estimated net operating income in 2013 and is much lower than the replacement cost.

Situated in the City of Emeryville, the 278-room hotel is well linked with the University of California Berkeley, a world famous university and the third largest employer in the Bay Area. Additionally, the hotel also benefits from the high demand generated from the large East Bay/Oakland office market spanning more than 113 million square feet.

Centrally located between San Francisco and Oakland, the hotel caters to the demand of travelers in both cities and is in close proximity to the two international airports. As a matter of fact, the hotels’ strong reservation system and guest loyalty programs have been major demand drivers in the past.

RLJ Lodging has been active on the acquisition front in key gateway markets of United States like Washington DC, New York City and others. Recently, it also acquired two focused-service hotels, the 187-room Residence Inn by Marriott Bethesda Hotel Downtown and the 226-room Courtyard New York Manhattan/Upper East Side for a combined purchase price of $146.5 Million. Overall, RLJ Lodging has completed three acquisitions in core markets for a total of $182.7 million over the last 30 days.

Founded in 2000, RLJ Lodging invests in real estate markets and manages real estate funds in United States. It primarily focuses on the acquisition of premium-branded, focused-service and compact full-service hotels. As of now, the company owns 144 hotels, having more than 21,300 rooms, spanning across 20 states and the District of Columbia.

We have a long-term Neutral recommendation on RLJ Lodging, which presently has a Zacks #1 Rank translating into a short-term Strong Buy rating. We have a Neutral recommendation and a Zacks #3 Rank (short-term Hold rating) for Hospitality Properties Trust (HPT - Snapshot Report), one of the peers of RLJ Lodging.

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