Braemar Hotels & Resorts Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report. Braemar is an externally advised hotel REIT focused on luxury properties; at year-end it held interests in 16 hotels with 4,181 rooms, including two hotels held through a 75%-owned joint venture.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Total hotel revenue | $669.6 million | $427.5 million |
| Operating income | $68.4 million | $1.4 million |
| Net income (loss) | $19.3 million | $(32.9) million |
| Net income (loss) attributable to Braemar | $17.8 million | $(26.7) million |
| Net income (loss) attributable to common stockholders | $(10.7) million | $(40.0) million |
| Cash from operating activities | $109.5 million | $64.0 million |
| Adjusted EBITDAre (non-GAAP) | $172.4 million | $87.5 million |
| Adjusted FFO available to common stockholders and OP unitholders (non-GAAP) | $93.1 million | $48.8 million |
- Revenue increased 56.6%; rooms revenue rose 53.8%, food and beverage revenue 76.3%, and other hotel revenue 39.1%. Higher occupancy and room rates, post-pandemic recovery, and acquisitions contributed.
- Across the portfolio, occupancy rose to 65.62% from 52.47%, ADR to $451.56 from $386.45, and RevPAR to $296.30 from $202.76. For the 13 hotels owned throughout both years, RevPAR increased to $275.83 from $202.61.
- Interest expense and loan-cost amortization increased to $52.2 million from $30.9 million, reflecting higher rates and additional acquisition-related debt. Corporate G&A increased to $18.1 million from $8.7 million, including a $7.2 million revised Ashford Securities funding estimate.
- Year-end cash and cash equivalents were $261.5 million; restricted cash was $54.2 million. Investing activities used $402.2 million, primarily for acquisitions and $49.1 million of hotel improvements. Financing activities provided $345.1 million, including $278.6 million of preferred-stock proceeds.
Debt and liquidity
- Year-end indebtedness was approximately $1.3 billion ($1.337 billion gross balance in the debt schedule; $1.334 billion net carrying value). The filing reports a 6.36% weighted-average rate after in-the-money caps. It describes most debt as variable-rate; $86.25 million of 4.50% convertible senior notes is fixed-rate.
- Management estimated 2023 capital expenditures of approximately $80 million and debt-interest payments of approximately $80.8 million, based on year-end reference rates. It stated that cash and operating cash flow should cover anticipated needs over the next 12 months, excluding potential final-maturity principal payments; this is not a guarantee.
- Scheduled 2023 debt maturities were $667 million, although management said extension options were available for all debt due within 12 months except $189.5 million. A $435 million mortgage loan was in a cash trap at year-end, with approximately $298,000 of restricted cash subject to it.
- Approximately 93.5% of debt was described as variable-rate in the financing discussion. The filing estimates that a 25-basis-point rate increase on year-end variable-rate balances would add about $3.1 million of annual interest expense, before considering the protection provided by interest-rate caps.
Material changes, outlook and notable items
- Braemar acquired the 96-room Ritz-Carlton Reserve Dorado Beach in March 2022 and the 210-room Four Seasons Resort Scottsdale in December 2022. It refinanced Park Hyatt Beaver Creek and converted certain loans from LIBOR to SOFR. The Dorado Beach mortgage was repaid in January 2023.
- Management expected a $0.05-per-share quarterly common dividend in 2023 ($0.20 annualized). The board retains discretion to change or suspend dividends. Common dividends were $0.01 per diluted share for each of the first three 2022 quarters and $0.05 for the fourth quarter.
- The company repurchased 1.5 million common shares for about $6.1 million during 2022. Subsequent repurchases completed the $25 million authorization by March 2023, including about 3.9 million additional shares for $18.9 million.
- A settlement with Accor generated an approximately $868,000 reduction in management fees in 2022; subsequent arbitration did not require additional payments. A certified California employment class action involving a hotel manager remained unresolved; no loss was accrued because the amount was not reasonably estimable.
- BDO gave an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting. A material weakness involved controls for evaluating complex transactions, including the accounting for deemed dividends on redeemable preferred stock in the earnings-per-share calculation. Management said it was evaluating remediation; the weakness was not considered remediated.
- Key risks include substantial debt and refinancing needs, floating-rate exposure, cash-trap provisions, economic or travel-demand weakness, inflation and operating-cost pressures, extreme weather, and reliance on hotel managers. The external-advisor structure also creates related-party and conflict-of-interest risks; Ashford Inc. affiliates provide advisory, management, construction, and other services.
Important facts for investors to verify
- Debt maturities, extension conditions, covenant compliance, cash traps, and available liquidity—particularly the $189.5 million of near-term debt without reported extension options.
- Whether 2023 operating cash flow can support planned capital spending, debt service, preferred dividends, and the expected common dividend as interest rates and hotel demand change.
- Underlying comparable-hotel trends and the contribution of the two 2022 acquisitions; reported annual results include only partial-year ownership of those hotels.
- The continuing impact of preferred dividends and deemed dividends: 2022 Braemar-attributable net income was positive, while common-stockholder-attributable results remained a loss.
- Progress in remediating the material weakness in financial reporting controls, and the status and potential exposure of the employment class action.
- Related-party fees, reimbursements, preferred-stock funding, share repurchases, and dilution from outstanding or potential securities; assess these against the company’s liquidity and capital needs.