Braemar Hotels & Resorts Reports First Quarter 2018 Results

DALLAS, May 2, 2018 /PRNewswire/ -- Braemar Hotels & Resorts Inc. (NYSE: BHR) ("Braemar" or the "Company") today reported the following results and performance measures for the first quarter ended March 31, 2018.  The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel EBITDA are comparable assuming each of the hotel properties in the Company's hotel portfolio as of March 31, 2018 were owned as of the beginning of each of the periods presented.  Unless otherwise stated, all reported results compare the first quarter ended March 31, 2018, with the first quarter ended March 31, 2017 (see discussion below).  The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

STRATEGIC OVERVIEW

• Focused strategy of investing in luxury hotels and resorts
• Targets conservative leverage levels of 45% Net Debt to Gross Assets
• Highly-aligned management team and advisory structure
• Dividend yield of approximately 6.1%

FINANCIAL AND OPERATING HIGHLIGHTS

• Net income attributable to common stockholders for the quarter was $2.3 million or $0.07 per diluted share
• Comparable RevPAR for all hotels not under renovation increased 2.3% to $237.21 during the quarter
• Adjusted funds from operations (AFFO) was $0.44 per diluted share for the quarter as compared with $0.46 per diluted share from the prior year quarter
• Adjusted EBITDAre was $29.8 million for the quarter, compared with $24.9 million for the prior year quarter
• Subsequent to quarter end, the Company completed the acquisition of the 266-room Ritz-Carlton Sarasota in Sarasota, FL for $171 million
• Subsequent to quarter end, the Company rebranded from Ashford Hospitality Prime to Braemar Hotels & Resorts effective April 24, 2018
• Capex invested during the quarter was $15.7 million

REBRANDING TO BRAEMAR HOTELS & RESORTS

On April 24, 2018 the Company officially rebranded from Ashford Hospitality Prime to Braemar Hotels & Resorts, trading on the New York Stock Exchange under ticker symbol BHR.

Rebranding to Braemar Hotels & Resorts marks a key milestone in the Company's strategy to focus on owning luxury hotels and resorts and capitalizing on the long-term superior performance of that segment of the lodging industry. Since announcing a revised strategy in early 2017, the Company has made substantial progress in rationalizing its non-core portfolio and announced the acquisition of three world-class luxury hotels – The Hotel Yountville in Napa Valley, California, The Park Hyatt in Beaver Creek, Colorado, and The Ritz-Carlton in Sarasota, Florida.  Currently, Braemar has the highest portfolio RevPAR of any lodging REIT, and thus has the highest quality hotel portfolio in the public markets.

The name "Braemar" pays homage to the Braemar Castle in Scotland and reinforces Braemar's relationship with the Ashford group of companies, as the name "Ashford" was originally selected based on a castle in Ireland. Additionally, the Braemar Castle signifies luxury, strength and stability, which highlights the Company's continued commitment to serve as the protector of capital for its shareholders and dedication to maximizing shareholder value.

Braemar will continue to be externally-advised by Ashford Inc. (NYSE American: AINC) and will maintain the mutually beneficial relationship with the Ashford group of companies.

UPDATE ON BUSINESS INTERRUPTION INCOME FROM HURRICANES AND WILDFIRES

During the first quarter, the Company recognized $4.9 million of business interruption income for the Ritz-Carlton St. Thomas and the Pier House Resort related to lost profits for the period of December 2017 through February 2018 due to the impact of Hurricane Irma.

Additionally, during the first quarter, the Company recorded $1.8 million in business interruption income for the Bardessono hotel and the Hotel Yountville related to lost profits for the period of October through December 2017 due to the impact of the Northern California wildfires. The Company has a deductible of $500,000 associated with this claim.

The Company will continue to work with its insurers on the business interruption claims at these properties although it expects that claims at the Pier House, Bardessono and Hotel Yountville will be nearing an end as operations at those properties return to normal.

RITZ-CARLTON SARASOTA ACQUISITION

On April 4, 2018, the Company completed the acquisition of the 266-room Ritz-Carlton Sarasota in Sarasota, FL for $171 million ($643,000 per key).  The purchase price represents a trailing twelve-month cap rate, as of December 31, 2017, of 6% and the Company expects to realize a stabilized unleveraged yield of approximately 8% on its investment. The Company also closed on the acquisition of a 22-acre plot of vacant land adjacent to the golf course for $9.7 million that is currently entitled for residential development.  Concurrent with the completion of the acquisition, the Company financed the hotel with a $100 million non-recourse mortgage loan.  The loan provides for a floating interest rate of LIBOR + 2.65% and has a five-year term. The property will continue to be operated as a Ritz-Carlton under a management agreement with Ritz-Carlton.

CAPITAL STRUCTURE

At March 31, 2018, the Company had total assets of $1.4 billion.  As of March 31, 2018, the Company had $826 million of mortgage debt of which $47 million related to its joint venture partner's share of debt on the Capital Hilton and Hilton La Jolla Torrey Pines.  The Company's total combined debt had a blended average interest rate of 4.7%.

PORTFOLIO REVPAR

As of March 31, 2018, the portfolio consisted of twelve properties.  During the first quarter of 2018, eight of the Company's hotels were not under renovation.  The Company believes reporting its operating metrics for its hotels on a comparable total basis (all 12 hotels) and comparable not under renovation basis (8 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its portfolio.  Details of each category are provided in the tables attached to this release.

• Comparable RevPAR decreased 9.8% to $209.27 for all hotels on a 9.0% decrease in ADR and a 0.9% decrease in occupancy
• Comparable RevPAR increased 2.3% to $237.21 for hotels not under renovation on a 0.6% increase in ADR and a 1.7% increase in occupancy

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.  Given the substantial seasonality in the Company's portfolio, to help investors better understand this seasonality, 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.  The details of the quarterly calculations for the previous four quarters for the twelve hotels are provided in the table attached to this release.

COMMON STOCK DIVIDEND

On March 15, 2018, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.16 per diluted share for the Company's common stock for the first quarter ending March 31, 2018.  The dividend, which equates to an annual rate of $0.64 per share, was paid on April 16, 2018, to shareholders of record as of March 30, 2018.

"We continue to execute on our strategic objectives and are excited to introduce Braemar Hotels & Resorts to further reflect our strategy to focus on the luxury segment," said Richard J. Stockton, Braemar's President and Chief Executive Officer. "Our acquisition of the Ritz-Carlton Sarasota continues our plan of recycling capital into higher quality, higher RevPAR assets consistent with our overall investment strategy.  Going forward, we remain focused on maximizing the returns on our existing investments through rigorous asset management and capital investment."

INVESTOR CONFERENCE CALL AND SIMULCAST

Braemar will conduct a conference call on Thursday, May 3, 2018, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (719) 457-2605.  A replay of the conference call will be available through Thursday, May 10, 2018, by dialing (719) 457-0820 and entering the confirmation number, 2397548.

The Company will also provide an online simulcast and rebroadcast of its first quarter 2018 earnings release conference call.  The live broadcast of Braemar's quarterly conference call will be available online at the Company's web site, www.bhrreit.com on Thursday, May 3, 2018, beginning at 11:00 a.m. ET.  The online replay will follow shortly after the call and continue for approximately one year.

Substantially all of our non-current assets consist of real estate investments secured by real estate.  Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to assist in evaluating a real estate company's operations. These supplemental measures include FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA.  FFO and EBITDAre are computed in accordance with our interpretation of standards established by NAREIT, which may not be comparable to how these measures reported by other REITs that do not define the term in accordance with the current NAREIT definitions or that interpret the NAREIT definitions differently than us.  None of FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, or Hotel EBITDA represents cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income (loss) as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity, nor are such measures indicative of funds available to satisfy our cash needs, including our ability to make cash distributions.  However, management believes FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA to be meaningful measures of a REIT's performance and should be considered along with, but not as an alternative to, net income and cash flow as a measure of our operating performance.

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Braemar Hotels & Resorts is a real estate investment trust (REIT) focused on investing in luxury hotels and resorts.

Ashford has created an Ashford App for the hospitality REIT investor community.  The Ashford App has been updated to reflect the newly-rebranded Braemar Hotels & Resorts.  The Ashford App is available for free download at Apple's App Store and the Google Play Store by searching "Ashford."

Certain statements and assumptions in this press release contain or are based upon "forward-looking" information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements in this press release may include, among others, statements about the implied share price for the Company's common stock.  These forward-looking statements are subject to risks and uncertainties.  When we use the words "will likely result," "may," "anticipate," "estimate," "should," "expect," "believe," "intend," or similar expressions, we intend to identify forward-looking statements.  Such statements are subject to numerous assumptions and uncertainties, many of which are outside Braemar's control.

These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated, including, without limitation:  general volatility of the capital markets and the market price of our common stock; changes in our business or investment strategy; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the market in which we operate, interest rates or the general economy; our ability to successfully complete and integrate acquisitions, and manage our planned growth, and the degree and nature of our competition.  These and other risk factors are more fully discussed in Braemar's filings with the Securities and Exchange Commission.  EBITDA is defined as net income before interest, taxes, depreciation and amortization.  EBITDA yield is defined as trailing twelve month EBITDA divided by the purchase price.  A capitalization rate is determined by dividing the property's annual net operating income by the purchase price.  Net operating income is the property's funds from operations minus a capital expense reserve of either 4% or 5% of gross revenues.  Hotel EBITDA flow-through is the change in Hotel EBITDA divided by the change in total revenues.  Hotel EBITDA Margin is Hotel EBITDA divided by total revenues.  Funds from operations ("FFO"), as defined by the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") in April 2002, represents net income (loss) computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from sales of properties and extraordinary items as defined by GAAP, plus depreciation and amortization of real estate assets, and net of adjustments for the portion of these items related to unconsolidated entities and joint ventures.  EBITDAre and Adjusted EBITDAre are non-GAAP financial measures. The Company computes EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which may not be comparable to EBITDAre  reported by other REITs that do not compute EBITDAre in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than the Company does. The White Paper on EBITDAre approved by the Board of Governors of NAREIT in September 2017 defines EBITDAre as net income (loss) (computed in accordance with GAAP), plus interest expense, plus income tax expense, plus depreciation and amortization, plus (minus) losses and gains on the disposition of depreciated property, plus impairment write-downs of depreciated property and investments in unconsolidated joint ventures, plus adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

The forward-looking statements included in this press release are only made as of the date of this press release.  Investors should not place undue reliance on these forward-looking statements.  We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations or otherwise.