Braemar Hotels & Resorts: Updated Thoughts, Needs to be Sold

A reader asked for my a new model on Braemar Hotels & Resorts (BHR), a luxury hotel REIT that I've personally lost a lot of money on in the past year.  My original thesis rested on former external manager Ashford Inc selling BHR outright and collecting their termination payment, but some noisy activists scared away potential buyers who were afraid any acquisition wouldn't be approved by shareholders.  Instead, BHR choose to sell off enough assets to pay the Ashford termination fee and internalize.  Following the internalization, corporate overhead costs have come down substantially, but still eat up roughly half of the free cash flow available to the equity as the company is subscale and has no business being independent.  Below is my quick model on the standalone value of the company:

The current stock price is too cheap, it should probably be trading closer to a 10% FCF yield of around ~$2.25/share, but its still a little hairy and probably deserves a discount today.  Where things really get interesting is in a sale of the company.  At the upcoming annual meeting on 12/21/2026, shareholders will vote to approve a new performance incentive plan for management, once approved, shortly after (sometime in Q1 2027) management will get RSUs or options at this depressed price.  Now that Braemar is no longer externally managed, has a fresh independent board and a financially incentivized management, a sale of the company should be the likely outcome.  Braemar's cost of capital is far too high to pursue acquisitions and they're too small to justify corporate overhead.

Below is my updated math on what a sale could bring, to be conservative I added a $100MM fudge factor for any frictional costs and/or capex reserves that a buyer might negotiate as part of a sale.

I get a sale value of something close to $7/share, probably wildly optimistic, but with the amount of leveraged created by the debt and preferred stock, realization of net asset value could produce multiples of the current stock price.  Risks clearly include a dip in the economy, hotels are highly sensitive to consumer spending, although the upper class that BHR caters too have generally been immune to recent tighter wallets.

It might be giving bagholder vibes, but I think something happens in 2027.

Disclosure: I owns shares of BHR