Q1 2022 Braemar Hotels & Resorts Inc Earnings Call
We update or revise them.
Statements made during this call do not constitute an offer to sell or solicitation of an offer to buy any securities securities will be offered only by means of a registration statement and prospectus, which can be found at www dot FCC dot Gov and.
In addition, certain terms used in this call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on form 8-K with the SEC on May four 2022 and May also be accessed through the company's website at www Dot Chr REIT Dom.
Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.
I will now turn the call over to Richard Stockton. Please go ahead Richard.
Good morning.
And welcome to our first quarter earnings Conference call.
I'll begin by providing an overview of our business and an update on our portfolio. After that Derek will provide a review of our financial results and then Chris will provide an update on our asset management activity.
Afterward, we will open the call for Q&A.
We have five key themes for today's call first our luxury resort portfolio continues to outperform and helped drive comparable hotel EBITDA of $59 4 million for the quarter, an increase of 26, 9% versus the comparable quarter of 2019.
Second we continue to be cash flow positive at the corporate level and generated more cash flow in the first quarter than we did for the full year of 2021.
Third our portfolio is well positioned to continue to outperform with very strong forward bookings as we are now seeing corporate transient and group business accelerating and their recovery on top of the already strong leisure segment.
Fourth our balance sheet is in good shape with our recent refinancing of the park Hyatt Beaver Creek, we have no remaining final debt maturities in 2022.
And fifth we completed the acquisition of the Ritz Carlton Reserve Dorado Beach, and Dorado, Puerto Rico, one of the most iconic luxury assets in the Americas, which will further increase our already industry leading revpar.
Our comparable hotel EBITDA of $59 4 million during the quarter was driven by strong occupancy levels at our resort properties and a 13, 9% increase in ADR over the prior year quarter.
Additionally, revpar for all hotels in the portfolio increased approximately 68% for the first quarter of 2022 compared to the first quarter of 2021, and our comparable portfolio Revpar.
Increased approximately 19% when compared to the first quarter of 2019.
In fact in the first quarter, we achieved the highest quarterly revpar in our company's history.
We're very encouraged to see our portfolio exceed comparable 2019 revpar levels.
Additionally, as discussed we just closed on the acquisition of the Ritz Carlton reserved rather beach in mid March <unk>.
Assuming that we had on the property for the entire month of March we would've achieved revpar in the month of March of an unprecedented $400.
I'm going to speak a little more about this luxury asset in a few moments, but this property is going to significantly increase our reported revpar going forward. We remain excited about our opportunities to deliver continued growth and for calendar year 2022, we now expect to materially exceed both 2019 Revpar in 2019.
Hotel EBITDA on both our comparable and actual basis.
Several of our hotels achieved very strong hotel EBITDA margins during the quarter. The Pier House resort at 62% Park Hyatt Beaver Creek at 42%.
The Ritz Carlton St Thomas at 42% and the Ritz Carlton Sarasota at 41%.
Our overall portfolio comparable EBITDA margin was 33%, despite including one hotel with negative hotel EBITDA.
While leisure demand continues to be strong, particularly on weekends and a significant uptick in revpar performance is likely to rely on a recovery of corporate transient demand and ultimately corporate group demand overall, we have seen a strong start to the second quarter at our resort properties for the month of April we finished with 68%.
Currency, and an ADR of $482, which equated to revpar for the month exceeding 2019 by almost 36%.
Many of our hotels on a drive to leisure markets and have been well positioned to benefit from the resurgence of pent up leisure demand in recent months.
In total nine of our 15 hotels are considered resort destinations. These hotels include the Ritz Carlton Sarasota Artesano Hotel Yountville, the Ritz Carlton Lake Tahoe, The Ritz Carlton Reserve Dorado Beach Pier House Resort Park, Hyatt Beaver Creek, Hilton La Jolla, Torrey Pines, and the Ritz Carlton St. Thomas.
We are pleased to report that this segment delivered a combined hotel EBITDA of $59 5 million for the quarter.
I also continue to be encouraged by the advancing recovery of our urban properties. These properties include the capital Hilton and Marriott Seattle waterfront, the notary hotel the Clancy.
Mr C Beverly Hills, and the Sofa Dell Chicago for the first quarter five of these six properties posted positive hotel EBITDA. This is a significant turnaround and demonstrates that demand is quickly returning to our cities both amongst the leisure and to a lesser extent the corporate transient segment.
We expect this trend to accelerate as office three openings continue during 2022.
Additionally, we were cash flow positive again at the corporate level for the fifth consecutive quarter, while our balance sheet was already in good shape as we enter 2022. This puts us in a much stronger position financially.
We're also happy to be continuing to implement our growth strategy with the acquisition of the 96 room Ritz Carlton Reserve Dorado Beach in Dorado, Puerto Rico for $193 million and iconic luxury asset. This hotel was the first Ritz Carlton reserve in the Americas and as one.
Only five Ritz Carlton reserve properties worldwide.
Premier beachfront location on the North coast of Puerto Rico, the property situated within Dorado Beach resort.
A 1900 acre master planned community and one of the most sought after residential real estate markets in both Puerto Rico as well as the United States.
The ultra luxury asset offers guests numerous world class amenities, both within the resort as well as the surrounding development.
In addition, we acquired the income stream attributable to 14 luxury residential units adjacent to the ultra luxury resort that participate in a rental management program.
We believe this property is a great addition to our portfolio and are very excited about the prospects of this acquisition as the hotels performance during the first quarter delivered comparable revpar of $1725 with 56% occupancy and an ADR of $3083.
Looking ahead, we continue to see a robust pipeline of acquisition opportunities in the market. We will continue to be extremely disciplined in our investment approach and only focus on transactions that we believe will be accretive to total shareholder return.
On the capital markets front we.
We continue to raise capital via our non traded preferred stock offering and during the quarter. We completed the refinancing of the park Hyatt Beaver Creek resort and Spa in very attractive terms.
Eric will provide more details on that in a moment.
Importantly, our balance sheet is in good shape, we have an attractive maturity schedule with our next maturity not until April 2023, and we recently reinstated our common dividend.
We have also been active on the Investor Relations front in the months ahead, we will continue to get out on the road to meet with investors to communicate our strategy and the attractiveness of an investment in Braemar.
Looking ahead, our unique portfolio focused on the luxury segment with many properties and drive to leisure markets positions us to perform well in both the near term and the long term as business and group travel resumes. We continue to believe that Braemar represents a compelling opportunity in the lodging REIT space.
We are a differentiated story with the majority of our assets in very desirable resort locations, the highest quality portfolio in the public markets.
A portfolio that is generating positive cash flow at the corporate level and what we believe is a solid liquidity position and balance sheet with attractive debt financing in place.
I will now turn the call over to Derek Thanks, Richard for the first quarter of 2022, we reported net income attributable to common stockholders of $11 4 million or.
Or <unk> 15 per diluted share for the quarter, we reported <unk> per diluted share of <unk> 41, compared to <unk> 20 per diluted share in the prior year quarter, reflecting a growth rate of 105%.
Adjusted EBITDA for the quarter was $49 $2 million, which was 41% higher than what we reported in the first quarter of 2019.
At quarter end, we had total assets of $2 billion.
We had $1 2 billion of loans of which $49 million related to our joint venture partner share of the loan on the capital Hilton and Hilton La Jolla Torrey Pines are.
Our total combined loans had a blended average interest rate of three 1%.
As of the end of the first quarter, we had approximately 45, 2% net debt to gross assets.
We ended the quarter with cash and cash equivalents of $185 2 million and restricted cash of $41 2 million.
The vast majority of that restricted cash is comprised of lender and manager held reserve accounts.
At the end of the quarter, we also had $41 million and due from third party hotel managers.
Primarily represents cash held by one of our brand managers, which is also available to fund hotel operating costs.
As Richard mentioned, our comparable hotel EBITDA during the quarter was $59 4 million.
After taking into account debt service G&A costs advisory fees and other corporate cost preferred dividends and capital expenditures for the quarter, we generated almost $30 million in positive cash flow.
During the quarter, we completed the refinancing of the Park Hyatt Beaver Creek resort and Spa on very attractive terms, the new nonrecourse loan totaled $75 million and has a two year initial term with three one year extension options subject to the satisfaction of certain conditions.
The loan is interest only and provides for a floating rate of sofa close to 86%.
The financing address the company's only final debt maturity in 2022 and illustrates that theres attractive financing available for high quality assets like those in our portfolio.
I'm also pleased to report that since we launched the effort in July of last year, we have raised approximately $86 $7 million of net proceeds from our series D and series M non traded preferred stock.
We expect the proceeds from the sale of the series D and series M. Non traded preferred stock as well as our internally generated cash flow to be our primary source of capital to facilitate our growth and deleveraging goals.
As Richard mentioned during the quarter, we completed the acquisition of the Ritz Carlton Reserve Dorado Beach, and Dorado Beach, Puerto Rico total consideration for the acquisition was approximately $193 million or $1 $8 million per key inclusive of the residential units in the rental program.
The acquisition was funded with $104 million of cash 6 million shares of Braemar common stock and the assumption of a $54 million mortgage loan.
No additional equity was issued to fund the cash portion of the consideration the cash portion was funded from available excess cash.
As of March 31, 2022, our portfolio consisted of 15 hotels with 3736 net rooms.
Our share count currently stands at $79 6 million fully diluted shares outstanding which is comprised of 71 3 million shares of common stock and $8 4 million op units.
In our financial results. We include approximately $4 1 million shares and our fully diluted share count associated with our series B convertible preferred stock and approximately $13 6 million shares and our fully diluted share count associated with our convertible senior notes.
This concludes our financial review I would now like to turn it over to Chris to discuss our asset management activities for the quarter.
Thank you Derek comparable Revpar for our portfolio increased 60% during the first quarter relative to the same time period in 2021 for.
For the first quarter, our portfolio reported 19% revpar growth over the same period in 2019.
The outperformance of this portfolio is evident when you contrast, our portfolio to the market as a whole as the U S luxury and upper upscale chain scale markets have only reached 97% and 79% of 2019 revpar levels respectively.
Our portfolio's market outperformance is a testament to the quality of the assets as well as the tireless drive of our asset management team.
Number of our assets had record setting performances during the first quarter and I would like to spend some time highlighting that success.
The Ritz Carlton St. Thomas just completed the best quarter in the hotel's history with $11 3 million in hotel EBITDA.
This is a 50% improvement over the first quarter of 2021, and a 38% improvement over the second quarter of 2021, which was the previous record.
Our team has implemented value add opportunities in order to take advantage of the increase in transient demand.
One of those initiatives was investing in additional cabana for pool and beach area, which produced approximately $500000 in revenue during the first quarter.
This and other initiatives contributed to the hotel producing more than $31 million in hotel EBITDA during the last 12 months.
To put this performance into perspective, we purchased the hotel for $64 million back in 2015, and invested another $23 5 million and capital expenditures.
The hotel is prospering and it has been a remarkable investments.
The Ritz Carlton Sarasota also completed a record quarter with $12 5 million in hotel EBITDA.
This is a 70% improvement over the first quarter of 2021, and a 62% improvement over the second quarter of 2021, which was the previous record.
These results are in large part to our team executing on initiatives that we identified during the acquisition process.
The first being the resort membership program, which we have since sold out and is now producing approximately $6 million a year in recurring revenue.
Another project, which was completed in December with the addition of 10 keys to the hotel.
These additional keys are allowing us to capitalize on the additional demand in the market.
With these long term initiatives in place, we anticipate that the hotel will continue to outperform.
Finally, I would like to highlight the park Hyatt Beaver Creek, which also completed a record quarter with $9 million and hotel EBITDA.
This is a 102% improvement over the first quarter of 2021, and 28% improvement over the first quarter of 2018, which was the previous record.
During the summer of last year, our team decided to re categorize several room types into premium rooms within the hotel, which contributed to the hotel's revpar outperformance of 27% relative to the first quarter of 2019.
In addition, our team completed a market study of competitor restaurants in their menu pricing, which informed our decision to increase the pricing in our food and beverage outlets.
This initiative contributed to the hotel exceeding first quarter 2019, food and beverage revenue by 27% and contributed to the hotel's historic performance.
Moving on to capital investment, we have invested heavily in our portfolio over the last several years to enhance our competitive advantage. These.
These investments uniquely position our portfolio to benefit from the pent up demand that we are currently seeing in our markets.
In 2022, we plan to move forward with the Guestroom renovation at the capital Hilton a renovation of the spa at the Ritz Carlton Sarasota, Our restaurant Patio edition at the Park Hyatt Beaver Creek, and adding a retail shop in the lobby at the Ritz Carlton Lake Tahoe.
Overall, we anticipate spending approximately $60 million to $70 million on capital expenditures this year.
I would like to finish by emphasizing how optimistic we are about the future of this portfolio as I mentioned earlier, a number of our hotels are already breaking hotel EBITDA records during.
During the first quarter eight of our hotels exceeded first quarter hotel EBITDA relative to 2019.
The remaining hotels are located in urban destinations, such as Philadelphia, San Francisco, Seattle, and Washington D C.
Group demand in our portfolio is returning with gross bookings during the month of March exceeding 2019 by 14%.
With the return of that business, we fully anticipate that our urban hotels will start to outperform as well and allow us to unlock the full potential of this portfolio.
I will now turn the call back over to Richard for final remarks.
Thank you Chris.
In summary.
We continue to be pleased with the recovery trends, we are seeing at our hotels driven by strong leisure demand in our luxury resort properties, we see a clear path for continued strength and our future financial results. We are well positioned moving forward with a solid balance sheet and a unique diversified portfolio.
Look forward to updating you on our progress in the quarters ahead. This concludes our prepared remarks, and we'll now open the call up for Q&A.
Thank you.
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Switching to start in Q.
One moment, please while we poll for questions.
Okay.
The first question comes from the line of Tyler.
Great.
Open hybrid.
Please go ahead.
Thank you good morning, and congratulations on the really really strong results here.
I wanted to ask a little bit more about the <unk>.
<unk> recovery I mean, clearly the the resort performance.
It's just so strong and so exceptional the urban seems to be the missing piece in.
At the same time, what really has the most upside here. So just kind of help us unpack a little bit more what youre seeing into April what's your perspective is on the on the summer.
Catalysts are you looking at in terms of urban trends getting better and if you could just.
Help us think about the timeline or the trajectory in terms of some of these urban assets, returning and we're turning back to 2019 levels.
Sure sure. Thanks Tyler.
I'll start and I'll, let Chris chime in as well.
Look I think in the first quarter as you saw from our results. The urban property is basically broke even right. So.
They barely squeak by but that doesn't tell the whole story, if you break it down and look month by month, there was considerable acceleration in revpar.
From January February and into March because remember in January and February we had AUM of chronic.
Rear its head and that significantly.
Impacted results, particularly in January and February .
And then we saw that kind of taper off.
Each month sequentially getting stronger to the point of April .
Getting stronger and you see the preliminary numbers were giving you on April .
So it's.
There is a catalyst and there's also a lack of an.
Impediment.
No.
Hopefully we have the guidance behind us because thats certainly an impediment to the urban properties.
But then in terms of of catalysts. The one thing I would say.
Is look at.
TSA throughput statistics.
We're right now sitting at 90%.
Of what it was pre pandemic right. So the amount of air travel right now that 90% of what it was pre pandemic and Thats continuing.
Trajectory upwards.
And so we absolutely predict.
Continuing improvement and for me the urban.
Portfolio represents the growth opportunity.
And our results right because right now literally zero contribution in the first quarter.
Suffice to say that's going to significantly change as we look out the next three quarters, but Chris Lee.
Jeff.
Look at the forecast for our urban hotels were expecting meaningful improvements through the back half of the year.
The back half of the year currently we're forecasting to be down in 19, and low single digits at our urban hotels and.
We've got less visibility there because the booking windows and shortened and so there may be some upside there.
And speak a little bit to kind of the main drivers at our urban hotels.
We're seeing some very positive signs from our group segment you heard me say that in March we exceeded 2019 gross bookings for group.
The other positive thing there is that.
ADR was up significantly on those bookings over 19.
We're also seeing some improvements out of our corporate group bookings so for the month of March the lead volume we received from corporate group bookings increased.
Increased significantly.
From the corporate segment.
We saw extreme acceleration in March that we're optimistic will continue as we kind of look ahead each each month throughout the quarter improved from corporate booking standpoint, but just to cite a couple of our urban hotels are two autograph hotels.
In San Francisco, and the notary Philadelphia, they stock corporate bookings doubled in March over what they saw in February and so as we continue to see office re openings and kind of experience behind us we're really optimistic as we look ahead to what we're seeing on the books and some of these key segments for these urban hotels.
Okay very helpful. Thank you just as a follow up question on the capital allocation side of things, obviously reinstated the common dividend.
Whats your view on.
Perhaps increasing that too.
Pre COVID-19 levels.
Sort of trigger points, perhaps are you are you booking apps in terms of making that decision is that something that could make sense as the year starts to starts to progress just given your positive outlook.
Yes, thanks for that product.
I don't have any current plans, one way or the other way on us.
Sure.
So what we're doing is kind of testing our resort results as we go through quarterly.
As far as setting a dividend rate that is related to pre pandemic levels.
That is not also.
Really the goal.
What we're trying to do.
As responsibly, both grow and deleverage the business as we've talked about in the past.
The process that will take us into next year and so we'll continue to assess our.
Our corporate cash flow, obviously, the first quarter was.
Fantastic in terms of generating.
Internal cash flow.
And so we will see how the remaining quarters play out.
Look to the extent that there are.
There is ample cash flow to to reinstate or display <unk> increased that dividend I think the board have looked very closely at that.
Suffice to say that we have the second highest insider ownership in the lodging REIT sector as well. So we're certainly looking at it from a personal perspective, as well and being aligned with investors.
So that's about as much clarity as I can give on the topic at the moment.
Okay.
Thats all from me I appreciate the detail. Thank you.
Thank you.
Again, if you would like to ask a question. Please press star one on your telephone keypad.
The next question comes from the line of fly Mangus.
<unk> Securities.
Please go ahead.
Good morning, this is Kyle on for Brian .
Hoping you could talk a little bit more about the performance of the Toronto each hotel in the quarter and maybe how it performed in March versus January and February .
And then how should we be thinking about revpar that hotel as we progress through the balance of 2022.
Yes, I'd be happy to take that so Dorado beach performed extremely well in the quarter.
March was actually a record breaking month for the hotel.
Very strong rate growth the previous record was December of 2021, and we exceeded that by $1 $7 million in room sales.
We're really excited about the potential of the resort and I think that we've got a proven track record of adding immediate value to acquisitions, you see that as we acquired the Mr. <unk> Hotel in Beverly Hills, which is now.
Even a year into ownership.
Hitting.
Year, two and year three pro forma levels. So we're really excited about the potential of Dorado, We've got a great plan in place to hit the ground running we're currently reevaluating.
Some of the value add offerings and working with the management company there to reengineer the staffing model.
But we've been we've been really happy the residents are another component that's going to add a lot of value there.
They are selling well.
Just to highlight kind of the impact those have there in the month of March we had a five bedroom unit that was occupied for 19 nights at an ADR of <unk> $26000 and so as Richard said in his comments that is a.
A hotel that we expect to just really drive.
It increased revpar of the portfolio as a whole.
Okay. Thanks, and then could you maybe just touch on the luxury residence is a little bit more maybe just kind of the average length of stay.
How many are typically occupied maybe kind of per quarter.
Yes, what I can tell you is we've got we've got 14 residential units that are there. They typically have a longer stayed in the resort that resort Internet itself has a pretty long length of stay.
<unk> flex.
Depending on seasonality, but as I said it is a 500 units they can get they can get very very high throughout.
Throughout the quarter I believe we saw occupancy is right around 50.
The 50% Mark for residences, we're working with the hotel to revamp how were our distribution for those residents. So how we're merchandising those residences all the platforms that they are selling it through we think theres some opportunity. There. So we expect the residence component of that hotel to be a much more significant.
Driver kind of moving forward.
Alright, thanks for the color that's all from me.
As Scott.
Thank you.
Ladies and gentlemen, we have reached the end of question and answer session and I would like to turn the call back to the management for closing remarks. Thank you.
Thank you everyone for joining us on our first quarter earnings call and we look forward to speaking with you again on the next call.
Thank you.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.