Braemar Hotels & Resorts sold another hotel to put it on the cusp of completing its breakup with Ashford, the publicly traded hospitality REIT’s manager.
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Braemar put the Four Seasons Resort Scottsdale under contract on Sept. 29 for $372M, or $1.8M per key, to round out a series of sales totaling nearly $1B that will fund the termination of its management agreement with Ashford, Braemar announced Thursday. The REIT expects to complete the split by the middle of next month.
The REIT's portfolio has been whittled down to seven luxury hotels as it has shed assets after entering into a strategic review of alternatives that led management to decide to pay a $480M termination fee to end its management agreement with Ashford and become fully self-managed.
The plan was announced in June, and Ashford said it would sell assets to fund the transition.
In July, Braemar sold The Ritz-Carlton Sarasota, the Hotel Yountville and the Bardessono Hotel and Spa for $437.5M. Each hotel was sold to individual LLCs and hasn’t been connected to any larger operator.
It sold the Pier House Resort & Spa a month later for $190M to a partnership between Sixth Street and Riller Capital. All of the transactions closed for more than $1M per key.
Dallas-based Braemar also provided a 2027 financial outlook with the disclosure of the latest sale. Its midpoint projections include an operating profit margin of 7.7% and $400M in total revenue, with 5.5% growth in revenue per available room across 2027.
“With Four Seasons Resort Scottsdale under contract and our transition to self-management on schedule, Braemar is well positioned to deliver long-term value for our shareholders,” Braemar CEO Richard Stockton said in a statement. “Current sector tailwinds and strong fundamentals support our luxury hotel investment strategy.”
Management expects to reduce annual administrative expenses from $42M to $15M through the termination. It is also planning to refinance several assets over the next six months that it expects will reduce interest rate payments and result in nearly $5M in additional savings.
The new portfolio consists of The Ritz-Carlton Reserve Dorado Beach; The Ritz-Carlton, St. Thomas; Capital Hilton; The Notary Hotel, Autograph Collection in Philadelphia; Sofitel Chicago Magnificent Mile; The Ritz-Carlton, Lake Tahoe; and Cameo Beverly Hills, LXR Hotels & Resorts.
Braemar has also resolved its dispute with its largest shareholder, Saudi-Canadian businessman Wafic Rida Said's Al Shams Investments Ltd., Braemar announced Thursday. In June, Al Shams called the $480M termination fee “theft dressed in a suit.”
The REIT entered a cooperation and settlement agreement under which Al Shams will withdraw its notice of nominations to the board of directors. Additional details of the deal weren’t disclosed.
The hotel industry has had a strong year amid a pickup in business travel and a summer season that included the World Cup.
Hotel occupancy increased 80 basis points year-over-year, with demand growth outstripping new supply in the second quarter, according to CBRE. The average daily rate was up 4.4%, which helped drive a 5.7% RevPAR increase compared to the prior year.
Occupancy rates remain below 2019 levels, but only four markets posted year-over-year declines in RevPAR for the second quarter.
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