BRAEMAR HOTELS & RESORTS PROVIDES UPDATE ON 2024 DEBT MATURITIES
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Insights
The refinancing and extension of debt maturities by Braemar Hotels & Resorts represents a strategic financial move, indicating proactive management of the company's capital structure amidst improving hotel debt capital markets. By securing a new mortgage loan with Aareal Capital Corporation for the Capital Hilton and extending loans for the Pier House Resort & Spa and the Ritz-Carlton St. Thomas, Braemar has effectively mitigated the immediate liquidity risk associated with its 2024 debt maturities. The use of both fixed and floating interest rates, with the latter tied to the Secured Overnight Financing Rate (SOFR), reflects a hedged approach to interest rate exposure.
The decision to fully repay the loan for the Cameo Beverly Hills suggests a confident liquidity position. However, the high fixed interest rate of 9.0% for the Hilton La Jolla Torrey Pines, coupled with the forbearance agreement, indicates potential challenges in refinancing or selling this asset. Stakeholders should monitor the company's subsequent actions regarding this property, as it could significantly influence financial outcomes. The overall impact on the stock market will hinge on investor perception of the company's debt management strategy and its ability to navigate the post-pandemic recovery of the luxury hotel sector.
The luxury hotel sector has faced significant challenges due to the COVID-19 pandemic, with fluctuating occupancy rates and changing consumer preferences. Braemar's focus on luxury properties positions it within a niche market that may recover at a different pace compared to broader hospitality sectors. The refinancing news could be perceived positively by the market, as it indicates the company's resilience and ability to secure favorable terms despite sector volatility.
Long-term implications for stakeholders include the potential for improved financial stability and the ability to capitalize on market recovery. However, the floating interest rates tied to SOFR suggest exposure to future interest rate fluctuations which could affect interest expenses and profitability. Therefore, the company's hedging strategies and response to interest rate trends will be critical in assessing its long-term financial health.
As a REIT, Braemar Hotels & Resorts' refinancing activities are of particular interest to investors who prioritize stable and predictable income streams. The extension of debt maturities can be seen as a move to ensure operational continuity and safeguard dividend distributions, which are a hallmark of REIT investments. The refinancing terms, particularly the interest rates relative to SOFR, will influence the REIT's cost of capital and, consequently, its net income and distributable cash flows.
Investors will also consider the geographic and property-type diversification within Braemar's portfolio when evaluating risk. The properties mentioned, including the Ritz-Carlton and Capital Hilton, are iconic and potentially resilient to market downturns due to brand strength. However, the specific mention of a forbearance agreement and potential sale of the Hilton La Jolla Torrey Pines property may raise concerns about asset performance and valuation within the portfolio.
- Refinanced the 550-room Capital Hilton in
Washington, D.C. with a new$110.6 million 3.75% . The property continues to be owned by a joint venture in which Braemar owns a75% equity interest (the "Hilton JV"). - The Hilton La Jolla Torrey Pines remains encumbered by the original mortgage loan, which now has been partially paid down to a remaining balance of
$66.6 million 9.0% . This property also continues to be owned by the Hilton JV. - The Company has extended the loan secured by the 142-room Pier House Resort & Spa in
Key West, Florida . The loan now has an initial maturity date of September 2025 with one one-year extension option, subject to the satisfaction of certain conditions, continues to have a balance of$80.0 million 3.60% . - The Company has also extended the loan secured by the 180-room Ritz-Carlton St. Thomas in St. Thomas, USVI. The loan now has an initial maturity date of August 2025 with one one-year extension option, subject the satisfaction of certain conditions, continues to have a balance of
$42.5 million 4.35% .
"We are pleased to have addressed these near-term debt maturities, as the hotel debt capital markets continue to improve," Richard Stockton, President & CEO of Braemar Hotels & Resorts announced. He continued, "With the Company's available liquidity, we plan to fully repay the remaining
Braemar Hotels & Resorts is a real estate investment trust (REIT) focused on investing in luxury hotels and resorts.
Forward-Looking Statements
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 include, among others, statements about the Company's strategy and future plans. 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: our ability to repay, refinance or restructure our debt and the debt of certain of our subsidiaries; anticipated or expected purchases or sales of assets; our projected operating results; completion of any pending transactions; risks associated with our ability to effectuate our dividend policy, including factors such as operating results and the economic outlook influencing our board's decision whether to pay further dividends at levels previously disclosed or to use available cash to pay dividends; our understanding of our competition; market trends; projected capital expenditures; the impact of technology on our operations and business; general volatility of the capital markets and the market price of our common stock and preferred stock; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the markets in which we operate, interest rates or the general economy; 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.
The forward-looking statements included in this press release are only made as of the date of this press release. Such forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our securities. Investors should not place undue reliance on these forward-looking statements. The Company can give no assurance that these forward-looking statements will be attained or that any deviation will not occur. 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, except to the extent required by law.
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SOURCE Braemar Hotels & Resorts, Inc.
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