Financial Performance Overview

Braemar Hotels & Resorts Inc. is a real estate investment trust (REIT) that invests primarily in high-end hotels and resorts. The company reported strong financial results for the three and nine months ended September 30, 2024, with net income attributable to the company of $12.6 million and $17.0 million, respectively.

The company’s revenue decreased 7.1% to $148.4 million in the third quarter of 2024 compared to the same period in 2023, primarily due to the sale of the Hilton La Jolla Torrey Pines hotel in July 2024. However, the company’s 15 comparable hotels (those owned for the full periods) saw occupancy increase 150 basis points and a 3.7% decrease in average daily rate (ADR) in the third quarter.

For the first nine months of 2024, the company’s revenue decreased 1.2% to $555.1 million compared to the same period in 2023. Occupancy at the company’s 15 comparable hotels increased 139 basis points, while ADR decreased 3.0% during this period.

Strengths and Weaknesses

A key strength of Braemar is its portfolio of high-quality, luxury hotel properties located in desirable markets. The company’s hotels have an average RevPAR (revenue per available room) of over twice the national average, indicating strong pricing power and demand. The company’s diversified geographic footprint also helps mitigate risk.

However, Braemar faces some challenges, including rising interest rates and inflation, which have increased its borrowing costs. The company also has significant exposure to variable-rate debt, making it vulnerable to further interest rate hikes. Additionally, the company’s reliance on its advisor, Ashford LLC, and other Ashford-affiliated entities creates potential conflicts of interest.

Outlook and Future Plans

Looking ahead, Braemar’s management is focused on improving the company’s liquidity position and reducing its leverage. The company recently sold the Hilton La Jolla Torrey Pines hotel for $165 million and used the proceeds to pay down debt.

Braemar also recently refinanced five of its hotels, securing a $407 million loan with a floating interest rate of SOFR + 3.24%. This refinancing extended the maturity dates on several of the company’s loans and provided additional flexibility.

The company’s board of directors has approved a new $50 million share repurchase program, which management believes will enhance shareholder value. Braemar also plans to continue investing in capital improvements and renovations to maintain the quality and competitiveness of its hotel portfolio.

Overall, Braemar’s financial performance has been mixed, with revenue declines offset by cost-cutting measures and strategic transactions. The company’s focus on high-end hotels in desirable markets remains a strength, but rising interest rates and leverage pose risks that the management team will need to navigate carefully.

Key Financial Indicators

The following tables present Braemar’s key performance indicators for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30

Nine Months Ended September 30

The data shows that Braemar’s occupancy increased slightly in both the third quarter and first nine months of 2024 compared to the same periods in 2023. However, ADR declined, leading to a modest decrease in RevPAR. Rooms revenue and total revenue also decreased, primarily due to the sale of the Hilton La Jolla Torrey Pines hotel.

Liquidity and Capital Resources

As of September 30, 2024, Braemar had $168.7 million in cash and cash equivalents and $48.5 million in restricted cash. The company’s net debt to gross assets ratio was 41.0%.

Braemar’s short-term liquidity requirements include operating expenses, interest and principal payments on debt, dividends, and capital expenditures. The company expects to meet these needs through cash flow from operations, capital market activities, and asset sales.

For the nine months ended September 30, 2024, Braemar generated $60.2 million in net cash from operating activities. The company used $52.7 million in net cash for investing activities, primarily for capital improvements and the purchase of securities, offset by proceeds from the sale of the Hilton La Jolla Torrey Pines hotel.

Net cash used in financing activities was $62.2 million, including $184.1 million in debt repayments, $39.0 million in dividend and distribution payments, and $36.3 million for preferred stock redemptions, partially offset by $234.0 million in new borrowings.

Braemar’s long-term liquidity needs include funding for acquisitions, redevelopments, and major renovations. The company plans to rely on a combination of debt and equity financing to meet these needs, but access to capital markets could be constrained by factors such as rising interest rates, market volatility, and the company’s leverage.

Non-GAAP Financial Measures

Braemar uses several non-GAAP financial measures to evaluate its performance, including EBITDA, EBITDAre, Adjusted EBITDAre, FFO, and Adjusted FFO. These metrics provide additional insight into the company’s operating results and financial condition by excluding the impact of certain non-cash and non-recurring items.

For the third quarter of 2024, Braemar reported Adjusted EBITDAre of $18.5 million, down from $27.0 million in the same period of 2023. Adjusted FFO available to common stockholders and OP unitholders was a loss of $17.6 million, compared to a loss of $5.4 million in the prior-year quarter.

For the first nine months of 2024, Adjusted EBITDAre was $127.4 million, down from $139.3 million in the same period of 2023. Adjusted FFO available to common stockholders and OP unitholders was $20.0 million, compared to $41.1 million in the prior-year period.

These non-GAAP measures help provide a more comprehensive understanding of Braemar’s financial performance and the factors that influence it, but they should be considered in addition to, not as a substitute for, GAAP-based financial information.

Conclusion

Braemar’s financial results for the three and nine months ended September 30, 2024 were mixed, with revenue declines offset by cost-cutting measures and strategic transactions. The company’s focus on high-end hotels in desirable markets remains a strength, but rising interest rates and leverage pose risks that the management team will need to navigate carefully.

Braemar’s liquidity position appears adequate to meet its short-term needs, but the company’s long-term growth and investment plans will depend on its ability to access capital markets and manage its debt levels. Investors should closely monitor the company’s progress in improving its financial position and executing its strategic initiatives.