8-K: Braemar Hotels & Resorts Urges Shareholders to Disregard Blackwells Capital Proxy Materials

Braemar Hotels & Resorts has issued a statement urging shareholders to disregard proxy materials from activist investor Blackwells Capital, deeming them invalid due to false statements and material omissions.

Summary

• Braemar Hotels & Resorts has sent a letter to shareholders advising them to disregard any proxy materials received from Blackwells Capital LLC.
• The company states that Blackwells' nomination notice was invalid due to false statements and material omissions, violating SEC rules and the company's bylaws.
• Braemar has filed a lawsuit against Blackwells to prevent them from proceeding with their proxy solicitation.
• The company's board recommends shareholders wait for Braemar's proxy materials, including the GOLD proxy card, before voting.
• Braemar highlights its strong performance, noting a RevPAR of approximately $307 in 2023, compared to a peer average of $196.
• The company also reported a hotel EBITDA per key of approximately $49,200, surpassing the peer average of $35,700.
• Braemar has successfully refinanced or extended nearly all of its 2024 debt maturities totaling approximately $300 million.
• Since 2013, Braemar has acquired 11 hotels with an average yield on cost of 8.5% on a trailing 12-month basis as of December 31, 2023.
• The company's board consists of eight members, six of whom are independent, with relevant expertise in REIT and lodging industries.

Sentiment

Score: 7

Explanation: The document conveys a confident tone regarding the company's performance and strategy, but the ongoing proxy fight introduces uncertainty. The strong financial metrics are positive, but the legal dispute and potential for disruption temper the overall sentiment.

Positives

• Braemar's RevPAR significantly outperformed its peers in 2023, reaching approximately $307 compared to the peer average of approximately $196.
• The company's hotel EBITDA per key of approximately $49,200 in 2023 was well above the peer average of approximately $35,700.
• Braemar has successfully refinanced or extended nearly all of its 2024 debt maturities, totaling approximately $300 million.
• The company has a track record of successful acquisitions, with an average yield on cost of 8.5% on hotels acquired since 2013.
• The board is composed of experienced individuals, with six out of eight members being independent.

Negatives

• The company is currently engaged in a legal dispute with Blackwells Capital LLC over proxy materials.
• Blackwells Capital, despite owning less than 1% of Braemar's voting stock, is attempting to gain control of the board.
• Braemar believes Blackwells is attempting an underhanded takeover at a price significantly below the company's intrinsic value.

Risks

• The ongoing legal dispute with Blackwells Capital could be costly and time-consuming.
• The company's ability to maintain its strong performance may be affected by market conditions and competition.
• There is a risk that Blackwells' actions could disrupt the company's operations and strategy.
• The company's forward-looking statements are subject to various risks and uncertainties, including the ability to repay or refinance debt.

Future Outlook

The company is focused on maximizing value for shareholders and is excited about significant growth opportunities as they continue to invest in premium-branded and high-quality independent luxury hotels and resorts. The company is also focused on strengthening its balance sheet.

Management Comments

• We remain fully committed to maximizing value for you and are excited about the Company's significant growth opportunities.
• Your Board has unanimously determined that Blackwells proxy campaign is invalid and recommends that you discard any white proxy card you receive from Blackwells.
• The Braemar Board strongly recommends that you disregard the white proxy card sent to you by Blackwells and to wait for the Company's proxy materials, including the GOLD proxy card.
• The Board is actively engaged in overseeing management's execution of the Company's strategy.

Industry Context

The announcement highlights a proxy battle, which is not uncommon in the REIT sector, where activist investors often seek to influence company strategy or governance. Braemar's strong RevPAR and EBITDA performance relative to peers suggests a competitive position in the luxury hotel segment.

Comparison to Industry Standards

• Braemar's RevPAR of approximately $307 in 2023 significantly exceeds the full-service lodging REIT peer average of approximately $196, indicating a strong performance in revenue generation per available room.
• The company's RevPAR growth of approximately 79% since 2014 also surpasses the peer average growth of approximately 28%, demonstrating superior growth in revenue per available room over time.
• Braemar's hotel EBITDA per key of approximately $49,200 in 2023 is notably higher than the peer average of approximately $35,700, suggesting better profitability per hotel room.
• The peer group used for comparison includes companies such as HST, RHP, PEB, SHO, XHR, DRH and PK, which are all publicly traded lodging REITs.
• The company's acquisitions have delivered an attractive average yield on cost of 8.5%, which is a strong indicator of successful capital allocation compared to industry averages.

Legal Proceedings

• Braemar has filed a lawsuit against Blackwells Capital LLC to prevent them from proceeding with their proxy solicitation.

Stakeholder Impact

• Shareholders are urged to protect their investment by disregarding Blackwells' proxy materials.
• The company's employees and customers may be indirectly affected by the ongoing proxy battle.
• The outcome of the proxy fight could impact the company's future strategy and performance.

Next Steps

• Shareholders are advised to wait for the company's proxy materials, including the GOLD proxy card.
• The company will continue to pursue legal action against Blackwells Capital.
• The 2024 Annual Meeting of Stockholders is scheduled for May 15, 2024.

Key Dates

Keywords

Braemar Hotels & Resorts, Blackwells Capital, Proxy Fight, Shareholders, Annual Meeting, RevPAR, EBITDA, Debt Refinancing, Hotel Acquisitions, REIT