Overview of Braemar Hotels & Resorts

Braemar Hotels & Resorts is a real estate investment trust (REIT) that invests primarily in high-end, luxury hotels and resorts. The company was formed in 2013 and is based in Maryland. As of December 31, 2024, Braemar owned interests in 15 hotel properties across 7 states, Washington D.C., Puerto Rico, and the U.S. Virgin Islands, with a total of 3,807 rooms.

Braemar does not operate the hotels directly, but instead hires third-party management companies to run the properties. The company is advised by Ashford LLC through an advisory agreement and does not have any employees of its own. Ashford Inc., an affiliate of Ashford LLC, also provides various other services and products to Braemar’s hotels.

Recent Developments

In July 2024, Braemar entered into a Cooperation Agreement with Blackwells Capital LLC to resolve a proxy contest and pending litigation. Key terms include:

• Blackwells withdrew its director nominations and proposals
• Blackwells agreed to voting restrictions and standstill provisions for 10 years
• The pending litigation was dismissed with prejudice
• Braemar agreed to appoint an additional independent director

Concurrently, Braemar provided an unsecured loan of up to $8.1 million to a Blackwells affiliate to reimburse 70% of the cost to purchase 3.5 million shares of Braemar’s common stock.

Braemar also took several actions to manage its debt, including:

• Amending the mortgage loan on the Ritz-Carlton Lake Tahoe to extend the maturity and reduce the interest rate
• Refinancing $355.2 million in mortgage loans on several properties with a new $363 million loan at a lower interest rate

Financial Performance

Braemar’s net loss attributable to the company decreased from $27.0 million in 2023 to $1.7 million in 2024. Key drivers of this improvement include:

Metric	2024	2023	Change
Rooms Revenue	$452.4 million	$464.9 million	-2.7%
Occupancy	67.63%	66.94%	+0.69 percentage points
ADR	$452.03	$451.48	+0.1%
RevPAR	$305.72	$302.20	+1.2%

The decrease in rooms revenue was primarily due to the sale of the Hilton La Jolla Torrey Pines in July 2024. Excluding this property, Braemar’s comparable hotels saw a 0.1% increase in rooms revenue, driven by a 0.69 percentage point increase in occupancy and a 0.1% increase in average daily rate (ADR).

Food and beverage revenue decreased 2.2% to $181.3 million, while other hotel revenue increased 6.4% to $94.8 million.

On the expense side, rooms expense increased 1.0%, food and beverage expense increased 0.9%, and other operating expenses decreased 0.9%. Management fees were up 1.0%, while property taxes, insurance and other expenses increased 10.0%.

Depreciation and amortization rose 5.9% to $98.7 million, while the advisory services fee from Ashford LLC decreased 1.9% to $30.5 million. Corporate general and administrative expenses increased 6.2% to $14.4 million.

Braemar recorded a $88.2 million gain on the sale of the Hilton La Jolla Torrey Pines. The company also recognized a $1.6 million equity loss from its investment in OpenKey, which included a $1.4 million impairment charge.

Interest expense and amortization of loan costs increased 14.8% to $108.1 million, primarily due to higher average interest rates. Braemar also recorded $6.1 million in write-offs of loan costs and exit fees related to various loan refinances and modifications.

Strengths and Weaknesses

Strengths:

• Diversified portfolio of high-quality, luxury hotel properties in desirable markets
• Strong operating performance with increases in occupancy and ADR
• Successful debt management through refinancings and extensions
• Significant gain on the sale of the Hilton La Jolla Torrey Pines

Weaknesses:

• Decline in rooms revenue due to the sale of one hotel property
• Increase in certain operating expenses, including property taxes and insurance
• Equity loss and impairment charge related to the OpenKey investment
• Higher interest expense from rising interest rates

Outlook and Future Prospects

Braemar’s future performance will depend on continued strength in the hotel industry, its ability to maintain high occupancy and ADR levels, and effective management of its debt obligations. The company has taken steps to extend and refinance its debt, which should provide more financial flexibility.

However, Braemar faces risks from potential economic downturns, increased competition, and rising costs. The company’s reliance on third-party management companies and services from Ashford Inc. also introduces some operational and financial risks.

Overall, Braemar appears to be navigating the current environment well, with a focus on optimizing its portfolio and managing its capital structure. The company’s high-quality assets, experienced management team, and recent debt transactions position it for potential future growth, though it will need to continue to closely monitor industry and economic conditions.