Braemar Hotels & Resorts Inc. (NYSE: BHR) today reported financial results and performance measures for the second quarter ended June 30, 2023. The comparable performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel EBITDA assume each of the hotel properties in the Company's hotel portfolio as of June 30, 2023, was owned as of the beginning of each of the periods presented.
SECOND QUARTER 2023 FINANCIAL HIGHLIGHTS
- Comparable RevPAR for all hotels decreased 4.2% over the prior year quarter to $309. Comparable ADR decreased 5.2% over the prior year quarter to $436 and Comparable Occupancy increased 1.0% over the prior year quarter to 70.9%.
- Net loss attributable to common stockholders for the quarter was $(13.0) million or $(0.20) per diluted share.
- Adjusted funds from operations (AFFO) was $0.20 per diluted share for the quarter.
- Adjusted EBITDAre was $46.3 million for the quarter.
- Comparable Hotel EBITDA was $53.7 million for the quarter.
- The Company ended the quarter with cash and cash equivalents of $128.0 million and restricted cash of $63.4 million. The vast majority of the restricted cash is comprised of lender and manager-held reserves. At the end of the quarter, there was also $15.4 million in due from third-party hotel managers, which is primarily the Company's cash held by one of its property managers and is also available to fund hotel operating costs.
- Net debt to gross assets was 37.3% at the end of the second quarter.
- Capex invested during the quarter was $17.5 million.
RECENT OPERATING HIGHLIGHTS
- During the quarter, the Company finalized an extension of its $435 million mortgage loan secured by four properties: The Notary Hotel, The Clancy, Sofitel Chicago Magnificent Mile, and Marriott Seattle Waterfront. The loan was paid down by $142 million and has a current balance of $293.2 million.
- Subsequent to quarter end, the Company entered into a new $200 million corporate financing that includes a $150 million term loan and a $50 million credit facility.
- Subsequent to quarter end, the Company announced the planned conversion of its Mr. C Beverly Hills Hotel to Hilton's LXR brand under the new name, Cameo Beverly Hills.
MR. C BRAND CONVERSION
Subsequent to quarter end, the Company announced the rebranding and planned conversion of its Mr. C Beverly Hills ("Mr. C") in Los Angeles, California to the Cameo Beverly Hills. Beginning August 4, 2023, Cameo Beverly Hills will be available for booking on Hilton's website at hilton.com and join Hilton Honors, Hilton's award-winning guest loyalty program. Following an extensive renovation, which is expected to be completed by the end of 2025, the hotel will join LXR Hotels & Resorts ("LXR"). One of Hilton's iconic luxury brands, LXR is a collection of unique, independent luxury properties around the world that focuses on individualized service and one-of-a-kind stays.
The conversion of the hotel, which was built in 1965, will reflect its unique history and distinctive location in the heart of West Los Angeles near iconic amenities and high-end shopping on Rodeo Drive. The Company is planning an approximately $25 million renovation to further elevate this distinctive hotel that will enable a revitalized luxury guest experience when it is completed. Added amenities and enhanced design elements will include upgrades to the guestrooms, guest bathrooms, restaurant, lobby, pool, fitness area, and meeting spaces. Remington will continue to manage the property after the conversion under a management agreement.
CAPITAL STRUCTURE
As of June 30, 2023, the Company had total assets of $2.3 billion and $1.1 billion of loans of which $49 million related to its joint venture partner's share of the mortgage loan on the Capital Hilton and Hilton La Jolla Torrey Pines. The Company's total combined loans had a blended average interest rate of 7.0%, taking into account in-the-money interest rate caps. Based on the current level of LIBOR and SOFR, and the Company's corresponding interest rate caps, approximately 79% of the Company's consolidated debt is effectively fixed and approximately 21% is effectively floating.
During the quarter, the Company finalized an extension of its $435 million mortgage loan secured by four properties: The Notary Hotel, The Clancy, Sofitel Chicago Magnificent Mile, and Marriott Seattle Waterfront. The loan was extended until June 2024. In conjunction with the extension, the Company paid down $142 million of the loan utilizing corporate cash on hand, which reduced the loan balance to approximately $293 million. As part of the extension the Company also purchased an interest rate cap through June 2024 with a strike rate of 4.69%.
Subsequent to quarter end, the Company completed a $200 million corporate financing. The financing includes a $150 million term loan and $50 million credit facility. The corporate financing is secured by The Ritz-Carlton Sarasota, Hotel Yountville, and Bardessono Hotel and Spa.
DIVIDENDS
On July 11, 2023, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.05 per diluted share for the Company's common stock for the third quarter ending September 30, 2023. The dividend, which equates to an annual rate of $0.20 per share, will be paid on October 16, 2023, to stockholders of record as of September 29, 2023. The Board of Directors will review its dividend policy on a quarter-to-quarter basis, with a view to increasing it as financial performance continues to improve. The adoption of a dividend policy does not commit the Board of Directors to declare future dividends or the amount thereof.
HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS
The Company believes year-over-year Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin comparisons are more meaningful to gauge the performance of the Company's hotels than sequential quarter-over-quarter comparisons. To help investors better understand the substantial seasonality in the Company's portfolio, the Company provides quarterly detail on its Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin for the current and certain prior-year periods based upon the number of hotels in the Company's portfolio as of the end of the current period. As the Company's portfolio mix changes from time to time, so will the seasonality for Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin.
"Braemar's urban hotels delivered solid second quarter operating performance," noted Richard J. Stockton, Braemar's President and Chief Executive Officer. "We remain extremely pleased with the continued momentum of these hotels which has been driven by strong corporate and group demand. Further, despite challenging year-over-year comparisons, our resorts continued to perform well with strong margins. We also continue to make solid progress addressing loan maturities and look forward to making additional announcements related to our liability management program," he added. "We couldn't be more excited about the conversion of our Mr. C Beverly Hills to Hilton's LXR brand and expect the strength of Hilton's reservation system to have a significant positive impact on the demand at that property. Looking ahead to the second half of 2023, we believe our portfolio is well-positioned for continued strong performance."