Throwing together a quick note on Braemar Hotels & Resorts (BHR) (~$180MM market cap) before I start a busy Friday, forgive me if there are any glaring mistakes, I'll come back and fix them over the weekend. Today, BHR announced the conclusion of their strategic review, originally it was a sale process, but now the luxury hotel REIT is going to internalize management and distance itself from its external manager, Ashford Inc. My first take is this move is designed to get Ashford Inc its $480MM termination fee without being subject to a shareholder vote (10% holder Al Shams Investments Ltd has been vocal in trying to block this payment to Monty Bennett) that would come with a full sale of the company. BHR recently announced the sale of 3 hotels for a total of $437.5MM (12.5x hotel EBITDA by my math) that along with cash on the balance sheet, should be sufficient to payoff Monty. Ashford directors are resigning, the board will be refreshed, and the new REIT will be free to pursue life without external management conflicts.
Post-internalization, this will be a pretty small subscale REIT that should attract takeover attention. Hotel REITs have been performing exceptionally this year, the top of the K-shaped economy is doing well, especially with all the Mag7 stock comp and AI IPO money hitting the upper class brokerage accounts. Below is my back of envelope of what BHR might fetch in a sale (so its not including corporate overhead as a standalone to be clear):
I own too much of this to begin with, but depending on where it trades today, could be provide an interesting entry point for those on the sideline now that Ashford will be out of the picture. Some of these properties are exceptional assets that any number of other REITs or private investors would gladly scoop up.
Disclosure: I own shares of BHR
https://mmx.prnewswire.com/media/MS1865353/Al_Shams_Letter_to_the_Board_re_Asset_Sale_vFINAL_-Letterhead.pdf?id=OA2715799&p=original
ReplyDeleteAl Shams response
Thanks! I bought some on Friday after reading this.
ReplyDeleteIs this Al Shams thing good or bad?
They might recover some money for shareholders but I would think litigation could delay a sale of the remainco.
Sort of both, I like that someone is trying to look out for shareholders, but I also wish Ashford could have sold the entire thing in one transaction, I think Al Shams prevented that by scaring off potential buyers who didn't want to get involved in a close merger vote. Hopefully they're able to get a board seat or two, but yes, I'd rather this get to a regular way REIT as soon as possible so it can re-rate or be sold.
DeleteWhat do you think about the risk of owning this before a new management team is selected? Could morph hands into another grifter. I still own it and the upside here is pretty large. Also any thoughts on the balance sheet, Common seems like such a small slice compared to debt / preferreds but I haven't studied it extensively.
ReplyDeleteAlso have you taken a look at ACR since they internalized the management. It's dropped quite a bit and trades at a large discount to book it seems. I know they issued the new shares at NAV but I'm assuming they marked up the purchased assets to compensate. Any thoughts?
BHR will be internally managed which I think is the big change here, if its truly an independent board with internal management, I can't imagine it'll stay public for too long. The balance sheet is pretty levered, but let's see where it ends up once the next couple assets are sold.
DeleteI did take a quick look at ACR, I like it, don't own it yet, but I think its interesting. Current management has done a nice job with it since taking it over, issuing shares at NAV is shareholder friendly (many external REITs will pay themselves in shares at market prices), get some asset management fees, etc.
I bought some during the crazy dip into the 15s because it seemed like an overreaction. One thing ACR seems (to me!) to have telegraphed pretty blatantly is a return to being a dividend payer when the transaction closes, which I think will invite in a new shareholder base. If they don't do that in short order--NOLs or no--I will likely sell (though TBF if there is any further rerate up I will also probably sell), as I find the go-forward entity's prospects slightly suspect.
DeleteI've gone back and forth on ACR a bit, I've got the deal reducing book value down to ~$25-26/share. And the REIT + asset manager revenue stream idea has been tried a few times, probably most notably with CLNY and Northstar, not sure the market every really puts much of a multiple on the asset manager piece.
DeleteYeah, I sold shortly after buying because of lack of explicit dividend language. Tangible book not great prospectively.
Delete@MDC this might be a dumb question -- but do you think that BHR is already priced as if they've paid $480MM to Monty?
ReplyDeleteI'm confused by how it's trading, so I'm not entirely sure. The portfolio sale closed, but they haven't sent out a press release announcing the completion of the internalization, so I assume it hasn't happened yet.
Delete@MDC Any thoughts on recent earnings?
ReplyDeletePier House Hotel in Key West just sold for $190M. 12.6x EBITDA.
ReplyDeletehttps://commercialobserver.com/2026/08/sixth-street-acquires-iconic-pier-house-hotel-in-key-west-for-190m
More from Al Shams: https://www.prnewswire.com/news-releases/al-shams-expresses-intention-to-nominate-majority-slate-of-independent-directors-for-braemar-hotels--resorts-302872393.html
ReplyDeletehttps://www.sec.gov/ix?doc=/Archives/edgar/data/1574085/000157408526000146/bhr-20260923.htm
ReplyDeleteAnother asset sale, Four Seasons Scottsdale, 12x+ hotel level EBITDA.
Are they liquidating? If they have the money to pay off Monty, what’s behind the continued asset sales?
DeleteThey should liquidate, are they? Not really sure. If they do, its a $5+ stock.
DeleteAs per the strategic review outcome they wanted to continue standalone with 6-8 properties. They're now at eight. So all is still according to plan.
DeleteAs far as I am concerned that plan is idiotic, as by my calculations EBITDA is barely enough to cover interest expenses, never mind SG&A, taxes and capex. So they should sell or liquidate. But the million dollar question is: is the company really going to act rationally now after shafting shareholders over and over again? Dunno ..
Is an Al Shams take under a risk you think about? I don't know much about their slate although Ms. Bitterman hasn't done a great job (albeit with not a great hand) at FSP. What Directors are Management / the current Board proposing?
DeleteI agree that a liquidation value paying out Monty looks like multiples of the current share price but I am struggling to handicap how the board room fight plays out and am admittedly a total tourist in this situation...
MDC have you look at $SACH? Seems like it's up your alley.
ReplyDeleteI haven't, what's the synopsis? Reverse merger? Thanks, I'll take a look when I get some time.
DeleteIs this a joke?
ReplyDelete"Braemar agreed to pay Al Shams $25,000,000 plus expenses under the Settlement Agreement. Braemar currently expects that its total contribution under the Settlement Agreement will be between $4,000,000 to $6,000,000, after application of any applicable insurance proceeds and contributions made by Ashford under the Allocation Agreement described below. There can be no assurances that Braemar will recover any or all of the insurance proceeds it anticipates receiving in connection with the Settlement Agreement. Braemar believes its contribution to the Settlement Agreement would likely be less than the cost of any potential litigation Braemar would have otherwise incurred."
Why do people invest in REITs? Absolute garbage corporate governance on so many levels
It's an ugly look.
DeleteBut. Now uncertainty around whether Al Shams will screw you is settled (he did, but now out of the picture at least), Ashford is officially gone, the assets are still great, don't understand why its not trading higher, someone will buy them.
Al Shams is still the biggest owner though? Also, from the release yesterday it sounds like they are going ahead with being self-managed. Why not liquidate? Would they actually sell if a bidder comes along?
DeleteIf the board is truly independent and it's internally managed, they have a fiduciary duty to shareholders and should sell. The current price is well below private market value. There's no external management agreement conflict in the way. Management probably first needs their options struck down here and then run it for a bit, see what happens, if the stock doesn't re-rate, then pull the exit rip cord.
Deletethe board has been a sham
DeleteWhen you have a chance, could you please update your model based off of yesterday release?
old fashioned greenmail
ReplyDeleteThoughts on multiples/cap rates for the caribbean assets (dorado beach and st thomas)? have heard these might be worth lower multiples given more expensive financing, higher cost insurance, etc. being in the caribbean. on the flip side have heard dorado beach is a one of a kind asset that could command a very high multiple. seems like value of these is a big driver of what the remaining portfolio is worth
ReplyDeleteInteresting price as of today. Anyone going long here?
ReplyDeleteBlackwell's out with a presentation, which does some useful pro forma calculations, and also seems... reasonable? For anyone who doesn't have a position looking to get in, that is, given the immense shareholder value destruction through the internalization process...
ReplyDeletehttps://www.globenewswire.com/news-release/2026/10/13/3380127/0/en/blackwells-capital-releases-life-after-ashford-an-independent-analysis-of-braemar-hotels-resorts-go-forward-portfolio.html