Monty Bennett To Collect $480M Breakup Fee As Luxury Hotel REIT Goes Independent

Luxury hotel REIT Braemar Hotels & Resorts is separating itself from longtime manager Monty Bennett following a failed, contentious bid to sell the company.

Dallas-based Braemar, which had a gross asset value of more than $1B at the end of Q1, will terminate all agreements with Bennett's Ashford Inc. and become a self-managed REIT, the company announced in a release Friday.

The company plans to simplify its corporate structure, recruit new board members and maintain the majority of its eight luxury hotels across the U.S. and the Caribbean.

“With a streamlined portfolio, in-house management and renewed focus on operational efficiency, Braemar will be better positioned for long-term profitability, shareholder alignment and value creation,” Braemar President and CEO Richard Stockton said in a statement.

Sale proceedings for the hotel REIT kicked off last August, with Braemar agreeing to pay Ashford a $480M termination fee for its advisory agreement as part of the sale.

This week, the company’s special committee and its board said that selling the company would eat into shareholder value far more than paying out its termination fee to Ashford to become a self-managed public company.

Consequently, Braemar will cancel its contracts with two Ashford subsidiaries and sell off some of its assets to pay the sale cancellation fee it owes Ashford.

Braemar disclosed in a June 4 Securities and Exchange Commission filing that it is under contract to sell three of its hotels, including the Ritz-Carlton in Sarasota, Florida, for $437.5M. It expects to sell a handful of other hotels to fund the rest of Ashford's fees, according to the release.

The REIT’s corporate governance will also undergo a shake-up, with an independent executive firm sourcing five new independent board members.

All five existing members, including Bennett, will step down. Stockton is the only director who will remain on the board and will be directly employed by the REIT going forward.

The company won't appoint any board members who have existing or prior relationships with Ashford, Bennett or his hotel magnate father, Archie Bennett Jr., according to the release.

Shares in Braemar have lost nearly 90% of their value since the luxury hotel unit was split from Bennett's Ashford Hospitality Trust in 2013. As of Friday afternoon, they trade at $2.29 per share for an overall market capitalization less than $150M.

The decision follows heavy scrutiny of Monty Bennett and the proposed company sale: The vast majority of the proceeds from the sale would have gone to Bennett, in spite of the company losing almost its entire value, Barron’s reported in April.

Last month, Braemar’s largest shareholder alleged that the sale process was “rife with potential and actual conflicts of interest” owing to the fact that the sale would award almost $500M to an outside adviser connected to Bennett.

The REIT now plans to directly hire management team members who are currently employed by Ashford as it cuts ties with the company. It will also relocate to a new Dallas headquarters. Executives estimate that the two moves combined will save Braemar approximately $25M a year in administrative costs.