Introduction to Braemar Hotels and Resorts
A publicly traded Dallas hotel operator run by one of its most notable industrialists is listing itself for sale amid declining stock valuations and mounting shareholder pressure. Braemar Hotels and Resorts, a Dallas-based real estate investment trust led by Dallas hotel magnate Monty Bennett, has been facing significant challenges in recent years.
Since opening on the New York Stock Exchange in 2013, Braemar Hotels and Resorts has seen its share price drop from just below $21.35 to $2.64. This significant decline in stock value has put immense pressure on the company to take drastic measures to maximize shareholder value.
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The company is more than $1.1 billion in debt, with around $473 million in stock — meaning it is carrying nearly twice its current equity in debt. This significant debt burden has made it challenging for Braemar to navigate the current market conditions and generate sufficient value for its shareholders.
D-FW Real Estate News
The Decision to Sell
In an effort to maximize shareholder value, a committee formed by the company’s board of directors and chaired by Bennett decided a sale was the best option. This decision was made after careful consideration of the company’s current financial situation and the potential benefits of a sale.
The company’s portfolio includes 14 properties in California, Florida and Colorado among others, operating under brands including Four Seasons, Ritz-Carlton, Park Hyatt, Marriott’s Autograph collection, Hilton and Sofitel. This diverse portfolio of high-quality properties is expected to attract significant interest from potential buyers.
“We’ve built a high-quality portfolio that is well-positioned to attract significant interest from private market buyers,” said Braemar CEO Richard Stockton in a statement. “With improving economic conditions, continued strength in industry performance, limited new room supply and healthy consumer spending, I believe we are entering a favorable environment for a potential sale.”
Market Sentiment and Shareholder Pressure
A news release issued by the company blamed market sentiment toward lodging real estate investment trusts despite Braemar’s revenue per available room outperforming the national average, as well as shareholder pressure to generate more value. The company has been facing significant pressure from its shareholders to take action to improve its financial performance and increase its stock value.
“When we created Braemar back in 2013, our hope was that Braemar’s high-quality portfolio and strong property performance would result in an attractive valuation giving the company an attractive cost of capital for growth,” Bennett said in a statement. However, the company’s actual performance has not met these expectations, leading to the current situation.
The Sale Process
Braemar is retaining Milwaukee-based Robert W. Baird & Co. as its financial adviser, which is initiating the sale process immediately. The company is expecting significant interest from potential buyers due to the high quality of its portfolio and the favorable market conditions.
“Hotel portfolios like the Braemar portfolio do not come to the market very often, and we believe the opportunity to acquire this iconic portfolio will attract significant buyer interest from around the world and result in an attractive valuation for shareholders,” Bennett said.
In the event of a sale, Braemar will pay $480 million to its adviser, Ashford, a Dallas-based commercial real estate asset manager for which Bennett is also CEO. This payment is a significant consideration for the company and its shareholders.
In its statement, the company clarified a sale is not guaranteed. The outcome of the sale process is uncertain, and the company may not be able to achieve its desired goals.
Conclusion
The decision by Braemar Hotels and Resorts to list itself for sale is a significant development in the company’s history. The company is facing significant challenges, including declining stock valuations and mounting shareholder pressure. The sale process is expected to attract significant interest from potential buyers, but the outcome is uncertain. The company’s shareholders will be closely watching the developments in the coming months to see if the sale will result in an attractive valuation for their shares.
Frequently Asked Questions
Q: Why is Braemar Hotels and Resorts listing itself for sale?
A: The company is listing itself for sale due to declining stock valuations and mounting shareholder pressure. The company’s board of directors believes that a sale is the best option to maximize shareholder value.
Q: What is the company’s current financial situation?
A: The company is more than $1.1 billion in debt, with around $473 million in stock. This significant debt burden has made it challenging for Braemar to navigate the current market conditions and generate sufficient value for its shareholders.
Q: What is the expected outcome of the sale process?
A: The outcome of the sale process is uncertain. The company may not be able to achieve its desired goals, and the sale may not result in an attractive valuation for shareholders.
Q: Who is advising the company on the sale process?
A: Braemar is retaining Milwaukee-based Robert W. Baird & Co. as its financial adviser, which is initiating the sale process immediately.
