8-K: Braemar Hotels & Resorts Reports Mixed Fourth Quarter and Full Year 2023 Results Amidst Strategic Debt Management

Braemar Hotels & Resorts reported a net loss for both the fourth quarter and full year 2023, while also making progress on refinancing and extending key debt maturities.

Summary

• Braemar Hotels & Resorts announced its financial results for the fourth quarter and full year ended December 31, 2023.
• The company experienced a net loss attributable to common stockholders of $(31.1) million, or $(0.47) per diluted share, for the fourth quarter.
• Adjusted funds from operations (AFFO) for the quarter was $0.04 per diluted share, and adjusted EBITDAre was $37.4 million.
• Comparable RevPAR decreased by 4% to $288, with a 3.6% decrease in ADR to $452 and a 0.9% decrease in occupancy to 63.6% compared to the same quarter in the previous year.
• For the full year, the net loss attributable to common stockholders was $(74.0) million, or $(1.13) per diluted share.
• Full year AFFO per diluted share was $0.61, and adjusted EBITDAre was $176.7 million, reflecting a 3% growth rate over the prior year.
• Comparable RevPAR for the full year decreased by 1.6% to $307, with a 4.9% decrease in ADR to $458, but a 3.5% increase in occupancy to 66.9% compared to the previous year.
• The company invested $21.5 million in capex during the fourth quarter and $77.1 million for the full year.
• Braemar successfully extended or refinanced several mortgage loans, including those secured by the Ritz-Carlton Lake Tahoe, Capital Hilton, Pier House Resort & Spa, and Ritz-Carlton St. Thomas.
• A six-month forbearance was received on the mortgage loan secured by the Hilton La Jolla Torrey Pines.
• As of December 31, 2023, the company had total assets of $2.2 billion and $1.2 billion of loans with a blended average interest rate of 7.4%.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the reported net losses and declines in key performance indicators like RevPAR and ADR. However, the company's strategic debt management and positive performance of recent acquisitions provide some offsetting factors.

Positives

• The company successfully refinanced the mortgage loan secured by the Capital Hilton.
• The company extended the mortgage loans secured by the Ritz-Carlton Lake Tahoe, Pier House Resort & Spa, and Ritz-Carlton St. Thomas.
• The company received a six-month forbearance on the mortgage loan secured by the Hilton La Jolla Torrey Pines, providing time to explore refinancing or sale options.
• The company's two most recent acquisitions, the Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale at Toon North, reported strong RevPAR growth of 9% and 5%, respectively, during the quarter.
• Approximately 74% of the company's consolidated debt is effectively fixed, mitigating some interest rate risk.
• The company declared a quarterly cash dividend of $0.05 per diluted share for the first quarter ending March 31, 2024.

Negatives

• The company reported a net loss attributable to common stockholders of $(31.1) million for the fourth quarter of 2023.
• The company reported a net loss attributable to common stockholders of $(74.0) million for the full year 2023.
• Comparable RevPAR decreased by 4% in Q4 2023 and 1.6% for the full year 2023.
• Comparable ADR decreased by 3.6% in Q4 2023 and 4.9% for the full year 2023.
• Comparable Occupancy decreased by 0.9% in Q4 2023.
• The company's urban hotel portfolio is still in the process of recovering.
• The company's resort hotel performance, while outperforming pre-pandemic levels, still saw a decrease in RevPAR, ADR and occupancy in Q4 2023.

Risks

• The company's ability to repay, refinance, or restructure its debt and the debt of certain subsidiaries is a risk.
• The company faces risks associated with its ability to effectuate its dividend policy, which is subject to operating results and economic outlook.
• The company is subject to general volatility of the capital markets and the market price of its common and preferred stock.
• Changes in interest rates or the general economy could negatively impact the company.
• The company faces competition in the markets in which it operates.
• The company's urban hotel portfolio is still in the process of recovering.

Future Outlook

The company expects a more favorable refinancing environment going forward, which will continue to reduce the company's interest expense on these and other future financings. They also anticipate a ramp-up of group pace and believe their portfolio is well-positioned to outperform in both the near-term and long-term.

Management Comments

• Richard J. Stockton, Braemar's President and Chief Executive Officer, noted that resort hotel performance continued to meaningfully outperform pre-pandemic levels while the urban hotel portfolio continues on its upward recovery trend.
• He also stated that the company remains pleased with the performance of its two most recent acquisitions, the Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale at Toon North.
• He added that the company recently refinanced or extended almost all of its 2024 debt maturities.

Industry Context

The results reflect a mixed performance in the hospitality sector, with resort properties showing strength while urban hotels are still recovering. The company's strategic focus on luxury hotels and resorts positions it to benefit from the ongoing recovery in travel and tourism, but it also faces challenges related to debt management and interest rate fluctuations.

Comparison to Industry Standards

• Braemar's performance is mixed when compared to industry benchmarks.
• While luxury resorts are generally performing well, Braemar's urban hotels are lagging behind, similar to trends seen in other hotel REITs with significant urban exposure such as Host Hotels & Resorts and Park Hotels & Resorts.
• The company's RevPAR decline in Q4 is concerning, as many other hotel REITs have reported flat or positive RevPAR growth in the same period, such as Pebblebrook Hotel Trust.
• The company's debt management activities are in line with industry trends, as many hotel REITs are actively refinancing and extending debt maturities to manage interest rate risk, similar to what companies like Ryman Hospitality Properties are doing.
• The company's dividend policy is consistent with other REITs, which typically distribute a significant portion of their earnings to shareholders, but the board's review of the dividend policy on a quarter-to-quarter basis is a common practice in the industry.

Stakeholder Impact

• Shareholders will be impacted by the net losses and the potential for future dividend adjustments.
• Employees may be affected by any changes in operations or strategic direction.
• Customers may experience changes in service or pricing as the company manages its portfolio.
• Creditors will be impacted by the company's debt management activities and financial performance.
• Suppliers may be affected by changes in the company's purchasing patterns.

Next Steps

• The company will conduct a conference call on March 1, 2024, to discuss the results.
• The Board of Directors will review its dividend policy on a quarter-to-quarter basis.
• The company will continue to explore options for refinancing or selling the Hilton La Jolla Torrey Pines property.
• The company will continue to monitor the performance of its urban and resort hotel portfolios.

Key Dates

Keywords

Hotels, Resorts, Real Estate Investment Trust, REIT, Financial Results, RevPAR, ADR, Occupancy, EBITDA, Debt Refinancing, Mortgage Loans, Dividends