RLJ Development LLC

With a core focus on upscale, select-service hotels, RLJ Development LLC has quickly grown to become one of the fastest-growing hotel investment companies in the nation. “The quality that distinguishes RLJ Development from our competition is the depth and the strength of our team,” Senior Vice President of Design and Construction Carl Mayfield says. “I call it our ‘people power.’ When you look at the quality and the caliber of the professionals that we recruit, invest in and develop, along with our president, our executive vice president and our senior team, I think we’ve got one of the best teams in the industry.”

The Bethesda, Md.-based company was formed in 2000 by Chairman Robert L. Johnson, founder, chairman and CEO of Black Entertainment Television; President Thomas J. Baltimore, former vice president of development and finance for Hilton Hotels Corp.; Ross Bierkan and Dr. Sheila Johnson. When Hilton publicly announced its decision to sell the nonproprietary hotels that had been acquired as part of its acquisition of Promus Corp., Johnson, who served on Hilton’s board of directors, teamed up with Baltimore and launched RLJ by purchasing seven Homewood Suites for $95 million.

Strong Relationships

RLJ’s expertise lies within upscale, select-service hotels in urban settings, of which it presently owns 124, Mayfield says. The company often acquires undervalued or poorly performing hotels throughout North America and the Caribbean and transforms them into highly lucrative, successful properties through value-added strategies.

“We love strong brands,” Mayfield notes. “This business is about partnerships, and we have excellent relationships with the major hotel brands.” RLJ owns 124 hotels, which include the 357-room Hilton Garden Inn in Chicago, the 298-room Hilton Garden Inn Manhattan and the 426-room Hilton Cancun Beach & Golf Resort in Cancun, Mexico. 

By any benchmark, RLJ’s portfolio has outperformed its peers, generating gross internal rates of return in excess of 20 percent, the company says. This is especially noteworthy given that Johnson, Baltimore and their team grew RLJ during the three consecutive years the industry faced a steady decline – 2001 to 2003. In late 2004, RLJ entered another chapter of significant growth with the initial closing of the RLJ Urban Lodging Fund – or RLJ Fund I – with $315 million in equity commitments. Its success spurred the organization of RLJ Fund II in 2006, with $743 million in equity commitments.

Now with RLJ’s third fund, RLJ Real Estate Fund III, “We have about $1 billion to deploy over the next 12 months, so our growth curve is straight up,” Mayfield says.

‘Working Harder’

RLJ is staying competitive. “We’re working harder now than we’ve ever done; we’re getting less done because of the economy, but we are really active players in the market looking at good value deals,” Mayfield explains.

“Our advantages are the strength of our underwriting, asset management team, executing value-added strategies and our tremendous legal and accounting teams. In the final analysis, we provide certainty to the seller.

“The market is really segregated into a bunch of different components,” he explains. “Luxury has some more pain to go through, but the select-service market – and I think there’s been a flight from luxury to select service – is starting to turn around a little bit. Our core investment thesis has always been select service.“That’s our product type – we buy existing assets and renovate them to drive performance and focus on profitability through operations – and then we keep our capital projects efficient and effective. When you combine the efficiency of a select-service product with unparalleled service, that’s a good combination.”

Results Driven

RLJ Development’s design and construction unit recently completed an internal assessment performed by Ernest & Young “to highlight and tweak some of our best business practices,” Mayfield explains. 

“With Ernest & Young’s assessment, we reviewed some of the road blocks between the accounting department and the project management department. Some of the roadblocks were tied to administrative issues and ineffective processes. We were able to identify the gaps and streamline the process.”

As a result, the company upgraded its internal cost accounting system. “This now gives us a common platform across all of our business units and allows us to go paperless, pay people quicker and really drive performance,” he says.“At the end of the day, we are able to pay a vendor within five to seven days; historically, that process could have taken anywhere from 45 to 60 days. 

“In this business, having a dedicated group of third-party vendors who have the institutional knowledge and clear direction from ownership – and keeping them motivated knowing they’ll be paid in a timely manner – allows us to drive performance,” Mayfield adds.

This is what’s important, he adds. “It’s all about performance, all about results,” he states.

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