Shares of the luxury hotel owner Braemar Hotels & Resorts fell near their all-time low this month, when its biggest shareholder abandoned a campaign to stop the real estate investment trust from paying out half a billion dollars to its departing Chairman Monty Bennett.
Braemar will pay shareholder Al Shams Investments $25 million, plus expenses, to vote its 9.5% block for the new management slate picked by Bennett. The REIT is selling half its hotels to fund the $500 million termination fee that gets it out of a management contract with Bennett's advisory firm Ashford Inc.
After selling over $1 billion worth of properties like the Four Seasons Resort in Scottsdale, Ariz., and the Ritz-Carlton in Sarasota, Fla., Braemar will own seven high-end hotels, including Ritz-Carltons in Puerto Rico, St. Thomas and Lake Tahoe.
The remaining hotels had revenue of $380 million in the 12 months ended June, said a Braemer filing this month. The REIT said that reduced overhead and debt could allow it to clear over $85 million next year in adjusted earnings before interest, taxes and depreciation.
"Current sector tailwinds and strong fundamentals support our luxury hotel investment strategy," said Braemar CEO Richard Stockton in the filing. "We are excited about this portfolio and will remain open to any pathway that maximizes its value."
Al Shams began a proxy campaign last month, after two years of open letter complaints by its billionaire founder Wafic Saïd over Braemar's governance. The Oct. 8 settlement deal sank Braemar stock to $1.18, near its Covid era low.
At Tuesday's price of $1.40, Braemar is down almost 95% from where it traded when Bennett brought the hotel REIT public 13 years ago.
Barron's wrote in April about the REIT's costly management arrangement with Bennett. Braemar owned some of the priciest destinations in North America, but shareholders saw little, after the expenses of debt and payments to Bennett and his management firms.
Over the past decade, Bennett fought off or bought off activist critics. One of those former activists is the hedge fund Blackwells Capital. Last week, Blackwells posted a presentation titled "Life After Ashford," in which it argues that Braemar should trade at two-and-a-half-times its current stock price, given its lower cost structure and the valuations it got for its property sales.
While Braemar has settled with Saïd, the REIT remains in litigation with two shareholder groups: the family office of its former director Bob Ghassemieh; and Brancous LP, an investment partnership led by Alejandro Malbran, who is waging his own proxy fight against Bennett's board candidates.
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