RLJ Development head Robert L. Johnson, who is also CEO of BET entertainment company and owner of both professional men's and women's basketball teams, describes the investor interest in the fund as "overwhelming." Among the diverse list of investors in the RLJ Fund is Marriott International Inc., which contributed $20 million. The fund will target urban areas and will develop properties that will operate under the Hilton and Marriott brands. Real estate investment bank Presidio Partners represented RLJ in completing the closing of the fund. In advance of its closing, the RLJ Fund acquired three properties accounting for a total investment of $122 million. An additional $48 million in investments is on tap to close within the next three months.

"Our goal is to achieve superior risk adjusted returns for our investors with a highly focused investment strategy," says RLJ president Thomas J. Baltimore Jr. "There is a unique window in the lodging sector with accelerating demand and limited supply growth expected in the next few years, particularly in dense urban markets."

The hotel industry has turned itself around since suffering a major blow induced by the Sept. 11 terrorist attacks. "Low long-term rates and favorable supply and demand dynamics will keep lodging investors active in the quarters ahead," Marcus & Millichap reports in its Spring 2005 Hospitality Research Report. "The resilient US consumer has supported a steady level of leisure travel demand over the last year, while foreign travel to the US has also picked up. Business travel returned last year, and pent-up demand should continue to unwind through 2005."