Braemar Hotels & Resorts, Inc. Preferreds (BHR.PB) Might be Attractive
Their decision to sell might bring these to par, which would be an attractive return given their current price.
I’ve followed Braemar from afar for a while now and it has pretty much been a dumpster fire since inception in 2013.
They are externally-managed and have a terrible chairman who has largely been responsible for the destruction of value over time.
In my opinion, this is not investable with him (Monty Bennett) at the helm. I’ve been waiting around the rim to see if anything interesting might unfold as they have been pressured by various activists for a few years now but no material catalyst has been visible.
However, on 8/26/25 they announced they are going to sell, which narrows the range of outcomes and makes this a lot easier to solve for to see if there is money to be made here.
Background
Braemar was formed as a REIT in 2013 and owns luxury hotels and resorts. 14 to be exact after they recently sold one on 8/7.
As the stock price reflects, they have simply destroyed almost 90% of their value since inception in 2013. The main reason for this is the disastrous advisory agreement between the company and their external advisor, Ashford, Inc. This agreement has effectively led to Ashford siphoning out any and all value that should go to shareholders.
2 activists then enter the fold in 2024 after the stock reaches an insanely low price post-Covid, Blackwells Capital and Al Shams Investments. Blackwells initiates a proxy contest in May 2024 and ends up settling with the company controversially in July. Per the settlement, Blackwells withdrew their proxy bid in exchange for a few things. The first is that their expenses related to the proxy contest were reimbursed and the next is that Braemar agreed to issue a loan to Blackwells to reimburse them for the purchase of 3.5 million shares of Braemar’s stock, bought on the open market. The interest rate is SOFR + 3% and term is 5 years. It is also, PIK, meaning the company doesn’t make payments on it, the interest simply accrues until it is paid off.
After this, Blackwells completely changes their tune and is on the company’s side, which Al Shams speaks up about. From here there is not much that happens from an activist standpoint until June 2025, when Bob Ghassemieh initiates a proxy bid.
It appears an agreement was made on 8/25 with Ghassemieh, who filed a 13D and was looking to elect 3 new directors to the board. They reached a standstill agreement, nominated Ghassemieh to the board, and on 8/26 they put out an 8-K effectively announcing they are going to sell the company, which is what Ghassemieh and many other shareholders were pushing for.
Advisory termination fee
They did this by announcing that the company and Ashford Inc., which is the external manager that Monty Bennett controls, had reached a negotiated termination fee for the advisory agreement. This was the sticking point for so long as Ashford and Monty held the cards due to this outrageous agreement that should never have been implemented in the first place.
The termination fee was originally ~$575 million, but is now $480 million. So, when calculating NAV based on a potential sale, this must be baked in.
The preferred shares
I don’t have a position here and likely won’t. I don’t understand the hotel industry enough and this one is in the Charlie Munger “too hard” pile for me. With that said, if I were to attack this one, it would be from the preferred Bs as they are trading at a greater discount to the Ds.
The company has 2 classes of preferred shares that are publicly traded, Preferred B and D. There are also Preferred E and M classes that don’t appear to trade publicly. In a sale scenario, all preferred holders in all classes receive $25/share plus accrued dividends. They are also on parity with each other and sit in front of the common stock, but behind all debt.
As of 6/30/25 there are 3,078,017 outstanding Bs, 1,600,000 outstanding Ds, 13,391,250 outstanding Es and 1,420,421 outstanding Ms. This is a total of 19,489,688.
At $25 face value per share in a sale scenario, this is $487,242,200.
Other assets and debt
As of 6/30/25 the company has $135,689,000 in cash and restricted cash. And they have $1,210,878,000 in debt.
Putting it all together
To try to solve for whether or not the Preferred Bs will be redeemed for $25 in sale, we need to figure out what the 14 hotel assets are worth. Or better yet, we need to figure out what they need to be worth in order for the Bs to realize a $25 par value while the common gets nothing.
$135.7 million - Cash +
($1,210.9 million) - Debt +
($480 million) - Ashford termination fee +
($487.2 million) - All preferreds at $25 face =
($2,042.4 million)
Essentially, the properties must be worth $2.042.4 billion for the preferreds to realize full face value and the common to get nothing. I’m calculating the NOI from the hotels at $140 million. This is after the sale of the property in early August and a 4-5% reserve the company gives guidance on using.
This implies a high 6% cap rate for the common to get nothing and the preferreds to get $25/share. The cap rate must be a bit lower for the common to realize a gain at today’s prices.
That is simply too tight for me to get comfortable with. I don’t think there is a ton of downside on the Bs, but the most likely outcome if they cannot sell is that these drop down to around $12-13 where they were trading at pre-announcement.
Summary
If the implied cap rate of their hotels here were 200-250 basis points higher, I’d be interested here because it would seem unlikely for them to not find a buyer at that lower price. But with my lack of knowledge of the hotel space, especially the luxury niche, I just can’t wrap my head around this one.
Important: This information is for general purposes only and is not financial advice. Always seek professional guidance for investment decisions.