SCHEDULE 13D: Activist Investors Challenge Braemar Hotels & Resorts Board, Nominate Directors

A group of activist investors, including members of the Ghassemieh family, have filed a Schedule 13D, disclosing a 7.4% stake in Braemar Hotels & Resorts Inc. and formally nominating three directors to the company's board, citing concerns over strategic urgency and corporate governance.

Summary

• A group of Reporting Persons, primarily members of the Ghassemieh family and associated entities, have collectively acquired beneficial ownership of 5,168,586 shares of Braemar Hotels & Resorts Inc. Common Stock, representing approximately 7.4% of the outstanding shares.
• The Reporting Persons believe the Issuer's Board has failed to act with appropriate urgency in addressing stockholder concerns, specifically regarding strategic initiatives like restructuring into a self-managed REIT.
• On June 2, 2025, the Nominating Stockholder, Babak (Bob) Ghassemieh, delivered a formal nomination notice to the Issuer, proposing himself, Fred Ghassemieh, and Samuel J. Jagger for election to the Board at the 2025 annual meeting of stockholders.
• The Reporting Persons allege that the Issuer attempted to disenfranchise stockholders by significantly advancing the date of the Annual Meeting and announcing it late, materially altering the deadline for stockholder nominations and creating difficulties in complying with Bylaw requirements.
• They also express serious concerns that the Issuer's transfer agent, Computershare, may not have acted on its own accord in failing to finalize a share transfer to record name, and that the Issuer delayed delivery of a required questionnaire.
• The Nominees bring extensive experience in commercial real estate development, hotel operations, finance, and investment management, with decades of collective leadership in hospitality, real estate, and financial organizations.
• The Reporting Persons intend to continue engaging in discussions with management, the Board, and other stockholders regarding Board representation, composition, capital allocation strategy, capitalization, ownership structure, and operations.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the strong activist stance, explicit criticism of the current board's performance and governance, and allegations of manipulative tactics by the Issuer. While the activist's intent is positive for shareholders, the current situation described is contentious.

Positives

• The activist group, led by the Ghassemieh family, holds a significant aggregate stake of 7.4%, indicating strong conviction in their investment and potential influence.
• The nominated directors, Babak Ghassemieh, Fred Ghassemieh, and Samuel J. Jagger, possess extensive and relevant experience in commercial real estate, luxury hotel development and operations, and finance, which could bring valuable expertise to the Board.
• The group has a clear strategic objective, including the pursuit of a self-managed REIT structure, which could potentially unlock value for shareholders.
• The Reporting Persons have demonstrated a willingness to actively engage with the Issuer and advocate for stockholder interests, potentially leading to improved corporate governance and strategic direction.

Negatives

• The Reporting Persons allege that the Issuer's Board has failed to act with appropriate urgency and has engaged in tactics to disenfranchise stockholders, including manipulating the annual meeting date and obstructing the nomination process.
• The accusations of the Issuer manipulating corporate machinery and delaying processes suggest a contentious relationship between the activist group and current management, potentially leading to a prolonged and costly proxy fight.
• The document highlights a lack of responsiveness from the current Board to stockholder concerns, which could indicate entrenched management resistant to change.
• The alleged difficulties in share transfer to record name and questionnaire delivery raise concerns about the Issuer's transparency and adherence to fair corporate governance practices.

Risks

• The ongoing dispute between the activist group and the current Board could lead to a protracted proxy contest, diverting management's attention and resources.
• The Issuer's alleged manipulation of corporate machinery and resistance to the nomination process could escalate into legal challenges, incurring significant costs and reputational damage.
• Failure of the nominated directors to be elected could entrench the current Board further, potentially hindering strategic changes desired by a significant portion of shareholders.
• The proposed strategic initiatives, such as restructuring into a self-managed REIT, may face internal resistance or be more complex and time-consuming to implement than anticipated, even if the activist nominees are successful.

Future Outlook

The Reporting Persons intend to review their investment in Braemar Hotels & Resorts Inc. on a continuing basis and may increase or decrease their position depending on market conditions and other investment opportunities. They plan to engage in additional communications with management and the Board, as well as other stockholders, to discuss Board representation, the composition of the Board, and other strategic initiatives, including potential changes to the capital allocation strategy, capitalization, ownership structure, Board structure, or operations of the Issuer.

Management Comments

• "The Reporting Persons believe the Board has failed to act with appropriate urgency in addressing stockholder concerns, particularly regarding the pursuit of strategic initiatives such as restructuring the Issuer into a self-managed REIT."
• "The Reporting Persons believe their highly qualified Nominees will bring critical fresh perspectives, enhance stockholder alignment, and restore accountability to the Board."
• "Further underscoring the need for change, the Reporting Persons highlight the Issuer's apparent attempt to disenfranchise stockholders by manipulating the corporate machinery—namely, by significantly advancing the date of the Annual Meeting from its prior-year anniversary and announcing it late on the Friday before a holiday weekend."
• "The Reporting Persons have serious concerns that Computershare may not have been acting on its own accord in failing to finalize the share transfer to record name."
• "Given the Reporting Persons' long-standing relationship with the Issuer, including having engaged in transactions and being holders of preferred stock, the Reporting Persons believe this was another example of the Board's entrenchment tactics and a clear demonstration of its disregard for stockholder rights."

Industry Context

This Schedule 13D filing highlights a significant activist challenge within the hotel and resorts REIT sector. The Ghassemieh family, with deep roots in commercial real estate and hospitality, is seeking to influence Braemar Hotels & Resorts Inc.'s strategic direction, particularly advocating for a self-managed REIT structure. This move reflects a broader trend of increased shareholder activism in the real estate and hospitality industries, where investors are pushing for operational efficiencies, governance improvements, and value creation through strategic restructuring.

Comparison to Industry Standards

• The Ghassemieh family's background in developing and operating luxury hotels, such as the Mr. C Beverly Hills and Mr. C Seaport, and their involvement with First Credit Bank's commercial real estate finance, positions them with direct operational and financial expertise relevant to the hotel REIT industry.
• Fred Ghassemieh's experience in originating billions in real estate loans, including hundreds of millions in hospitality loans, and his family office's over 40 years of investing, developing, and operating commercial real estate with over one billion dollars in asset transactions, provides a strong foundation for assessing and proposing strategic changes for a hotel REIT.
• Samuel J. Jagger's leadership roles as Managing Director of The Maybourne Beverly Hills and General Manager of Fairmont Miramar Hotel & Bungalows, both luxury hotel properties, demonstrate direct, high-level operational experience in the hospitality sector, which is critical for a hotel REIT's board.
• The activist group's push for a self-managed REIT structure aligns with a common strategic consideration in the REIT industry, where internal management can sometimes lead to better alignment of interests and cost efficiencies compared to externally managed structures, though the optimal structure varies by company and market conditions.

Management Changes

Corporate Governance

Legal Proceedings

• No Reporting Person has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).
• No Reporting Person has, during the last five years, been party to a civil proceeding of a judicial or administrative body of competent jurisdiction that resulted in a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Related Party Transactions

• The Reporting Persons include multiple members of the Ghassemieh family (Babak, Fred, Alex, Fataneh, Lillian, Kambiz, Mahvash, Eric, Gavin, Sophia, Farhad) and trusts established for their benefit (Fred Ghassemieh Children's Trust, Feridoon Ghassemieh Descendant's Trust, Trust FBO Feridoon Ghassemieh, Trust FBO Alex Ghassemieh, Bob Ghassemieh 2021 Children's Trust, Lillian Ghassemieh 2021 Children's Trust, Trust FBO Firouzeh Ghassemieh).
• Several entities are managed by Ghassemieh family members or related individuals, including BL PCH LLC (Babak Ghassemieh as Manager), Pacific SHG Ventures, LLC (Alex Ghassemieh as Manager), Morning View Hotels BH I, LLC (Babak Ghassemieh and Alex Ghassemieh as Managers), Alpine Lake Partners, LP (Mahyar Amirsaleh and Cyrus Amirsaleh as Managers), and Palm Lake GP, LLC (Cyrus Amirsaleh as Manager and general partner of Alpine Lake).
• The Reporting Persons have entered into a Group Agreement to coordinate their activities with respect to the Issuer, including joint filing of Schedule 13D statements and soliciting proxies for Board election.

Stakeholder Impact

• **Shareholders**: Potential for increased shareholder value if the activist group's strategic initiatives (e.g., self-managed REIT) are successfully implemented. However, a prolonged proxy fight could create uncertainty and volatility.
• **Management and Board**: The current management and Board face significant pressure and potential changes in leadership and strategic direction due to the activist campaign.
• **Employees**: Potential for changes in operational structure or management, particularly if the company transitions to a self-managed REIT, which could impact employee roles and organizational culture.
• **Creditors**: Strategic changes or a proxy fight could indirectly affect the company's financial stability or credit profile, depending on the outcome and new strategic direction.
• **Customers/Suppliers**: Direct impact is likely minimal in the short term, but long-term strategic shifts in hotel operations or asset management could indirectly influence relationships.

Next Steps

• The Issuer's 2025 annual meeting of stockholders will be held, where the nominated directors (Babak Ghassemieh, Fred Ghassemieh, and Samuel J. Jagger) will be up for election.
• The Reporting Persons intend to continue engaging in discussions with the Issuer's management and Board.
• The Reporting Persons plan to engage in additional discussions with other stockholders of the Issuer.
• The Reporting Persons may make proposals to the Issuer concerning changes to the capital allocation strategy, capitalization, ownership structure, Board structure (including Board composition), or operations.
• The Reporting Persons may purchase additional shares or sell some or all of their shares, depending on various factors including market conditions and the Issuer's financial position and investment strategy.

Key Dates

Recommendation

Keywords

Braemar Hotels & Resorts, Schedule 13D, Activist Investor, Corporate Governance, Proxy Fight, Board Nomination, Hotel Industry, REIT, Shareholder Activism, Hospitality Real Estate