Suite success - Black Entertainment Television executive Robert L. Johnson - Brief Article - Statistical Data Included

Bob Johnson acquires hotels after selling BET and a part of DC Air

Having built wealth and clout as a capitalist, BET Holdings II founder, chairman, and CEO Robert L. Johnson embarks on hotel ownership while still soaring with DC Air.

Paying $95 million in cash, Johnson's new company, RLJ Development L.L.C., bought seven Homewood Suites by Hilton hotel properties in December. The hotel's are located in Washington, D.C., Massachusetts, Tennessee, Minnesota, Texas, Connecticut, and Florida.

At age 54, Johnson laughs at speculation that hotel ownership means he is shifting into pre-retirement mode, that maybe his goal is to move from the frantic entertainment arena into the tranquil domain of real estate. "There is no long-term game plan here. There is no winding-down strategy. It's just that I'm fortunate enough to be in a position to see good deals when they come across the table," says Johnson, who has been on the board of directors of Hilton Hotels Corp. for four years. "The hotel deal fits into a strategy of just buying strong growth assets that have strong brands that are managed well. That's a diversification strategy where I have an insider's advantage."

Being on US Airways' board of directors gave Johnson a chance, which he took, to create DC Air in May 2000, with a $142 million investment (see "Will DC Air Fly?" Newspoints, August 2000).

The merger agreement originally restricted Johnson to keeping majority ownership of DC Air for at least three years. In January, Johnson got a substantial boost. American Airlines announced that not only would it buy bankrupt Trans World Airlines, it was separately getting a piece of US Airways and, for $82 million, purchasing 49% of DC Air. American demanded that Johnson be freed from the three-year can't-sell clause, so US Airways made a new agreement with DC Air. Johnson can sell--and reap those airport slot profits (take off and landing rights)--any time he pleases.

While the airline deals were up in the air, Johnson was making solid progress on the ground.

Homewood Suites by Hilton hotels, which average 125 rooms per unit, cater to business executives traveling for week-long corporate training and meetings. Sitting on Hilton's board, Johnson decided the hospitality industry was very stable, with prospects for long-term growth, and that the extended-stay category is likely to generate significant revenue.

Homewood Suites are all managed by Hilton and are branded under the Hilton Hotels flag. RLJ Development gets the benefit of Hilton's management, reservation system, and bonus points system. Financing was a combination of equity from Johnson and debt from Lehman Brothers and GE Capital. Johnson owns 75% of RLJ Development. His two partners, Thomas J. Baltimore and Boss H. Bierkan, own 25%.

Baltimore, who is African American, projects the hotels' 2001 revenue will be $30 million, enough to put Johnson back on the BE INDUSTRIAL/SEBVICE 100 list after the sale of BET took him off it.

COPYRIGHT 2001 Earl G. Graves Publishing Co., Inc.
COPYRIGHT 2001 Gale Group