8-K: Braemar Clarifies Advisor Termination Fees for Potential Sale

Braemar Hotels & Resorts Inc. amended its agreement with its external advisor to clarify the payment terms for significant termination fees in the event of a company sale or change of control.

Summary

• Braemar Hotels & Resorts Inc. (the Company) and its operating subsidiary, Braemar Hospitality Limited Partnership, entered into an Amendment to a Letter Agreement with Ashford Inc. and Ashford Hospitality Advisors LLC (the Advisor) on December 22, 2025.
• The Amendment clarifies the circumstances and timing for payment of termination fees to the Advisor in connection with a potential Company Sale Transaction.
• The "Company Sale Fee" of $480 million (plus accrued fees), discounted from an original calculation of $574.83 million, is payable to the Advisor upon a Company Sale Transaction.
• A "Master Agreement Termination Fee" of $25 million is payable to the Advisor if the buyer in a Company Sale Transaction cancels the master project management and hotel management agreements.
• Payment priority dictates that the Master Agreement Termination Fee (if applicable) is paid first from Net Sale Proceeds, followed by the Company Sale Fee and accrued fees, before any other payments or distributions.
• The definition of "Company Sale Transaction" was revised to explicitly mean a "Company Change of Control" as defined in the Advisory Agreement.
• If Net Sale Proceeds from a single transaction are insufficient, proceeds from subsequent asset sales will be used to satisfy the fees.
• Upon full payment of these fees, the Company and Advisor may terminate the Advisory Agreement with 60 days' prior written notice.
• In the event of a sale or disposition of assets representing 50% or more of the Company's Gross Asset Value (as of January 1, 2025), the buyer must pay the Master Agreement Termination Fee directly to the Advisor.
• The Master Agreements will also terminate upon stockholder approval of a plan of liquidation, subject to payment of the Master Agreement Termination Fee.

Sentiment

Score: 6

Explanation: The amendment provides much-needed clarity on significant termination fees, which is a positive step for corporate governance and transparency, potentially aiding the ongoing exploration of a company sale. However, the substantial nature of the fees themselves remains a financial consideration.

Positives

• Eliminates unintended ambiguity regarding termination fees and payment timing, providing greater clarity for potential buyers and facilitating a competitive bidding process.
• Ensures consistency across potential transaction structures for how sale proceeds are applied.
• The Special Committee of independent directors reviewed and deemed the Amendment advisable and in the best interests of the Company.

Negatives

• The Company remains subject to substantial termination fees ($480 million Company Sale Fee and $25 million Master Agreement Termination Fee) payable to its external advisor upon a Company Sale Transaction.
• These fees have priority over other payments, dividends, or distributions from Net Sale Proceeds, potentially impacting shareholder returns.

Risks

• The Company is exploring a potential sale, which inherently carries execution risk and uncertainty regarding valuation and completion.
• Significant termination fees payable to the Advisor could deter potential buyers or reduce the net proceeds available to shareholders in a Company Sale Transaction.
• The requirement for buyers to assume or pay to terminate Master Agreements could complicate sale negotiations.
• Insufficient Net Sale Proceeds from initial asset sales could prolong the payment process for the Company Sale Fee and Master Agreement Termination Fee.

Future Outlook

The Company continues to explore a potential sale, with the Amendment designed to provide clarity to potential buyers regarding termination payments, thereby facilitating a competitive bidding process and a Company Sale Transaction.

Management Comments

• The Special Committee of the board of directors of the Company, comprised entirely of independent directors, determined, after evaluating strategic alternatives, that it was in the best interests of the Company to pursue to a Company Sale Transaction and enter into that certain letter agreement, dated as of August 26, 2025.
• The Special Committee desires to amend the Letter Agreement to eliminate unintended ambiguity regarding the circumstances under which certain termination fees become due and payable to Advisor and the timing of payment in order to more fully reflect the parties original intent under the Letter Agreement and ensure consistency across potential transaction structures in how the proceeds from a Company Sale Transaction are applied.
• The Special Committee has reviewed this Amendment and has deemed this Amendment to be advisable and in the best interests of the Company.

Industry Context

This amendment reflects ongoing efforts by companies, particularly those with external advisory structures common in REITs, to clarify contractual obligations and facilitate strategic transactions like company sales. The substantial termination fees highlight the complex financial arrangements often present between externally managed entities and their advisors, which can be a point of contention or scrutiny in M&A scenarios.

Corporate Governance

Related Party Transactions

• The Company's external advisor, Ashford Inc. and Ashford Hospitality Advisors LLC, is a related party. The Amendment details the payment of a $480 million Company Sale Fee and a $25 million Master Agreement Termination Fee to this related party upon a Company Sale Transaction.

Stakeholder Impact

• Shareholders: Increased clarity regarding the financial implications of a Company Sale Transaction, potentially reducing uncertainty. However, the substantial termination fees will reduce the net proceeds available to shareholders.
• Potential Buyers: The clarification of termination fees provides greater certainty, potentially making the Company a more attractive acquisition target by removing ambiguity.
• Advisor (Ashford Inc. and Ashford Hospitality Advisors LLC): Ensures the terms and timing of their termination payments are clearly defined and prioritized in a sale scenario.

Next Steps

• Continue the exploration of a potential Company Sale Transaction.
• Definitive documentation for any Company Sale Transaction will need to incorporate the terms of this Amendment regarding termination fees and Master Agreements.
• Upon full payment of specified fees, the Advisory Agreement may be terminated with 60 days' notice.

Key Dates

Keywords

Braemar Hotels & Resorts, BHR, SEC Filing, 8-K, Advisory Agreement, Termination Fees, Company Sale, Change of Control, Hotel Management, Real Estate Investment Trust, REIT, Ashford Inc., Corporate Governance