Braemar Hotels & Resorts Inc. (NYSE: BHR), known for its strategic focus on luxury hotel investments, confirmed the sale of the 394-room Hilton La Jolla Torrey Pines in La Jolla, California for $165 million. This deal is part of a broader capital market strategy outlined by the company, which also includes the evaluation of selling two additional hotels, repaying all 2024 debt maturities, a $50 million preferred share redemption program, and a $50 million common share buyback authorization.

The transaction for Hilton La Jolla Torrey Pines, which includes an anticipated $40 million in capital expenditures, values the property at a 7.2% capitalization rate based on net operating income for the past twelve months ending March 31, 2024. The sale is projected to close by August 2024, contingent upon approvals from the City of San Diego and the ground lessor. However, the company cautions that the completion of the sale is not guaranteed.

In a proactive financial move, Braemar has fully repaid a $30 million loan tied to the 143-room Cameo Beverly Hills hotel in Los Angeles, California. This repayment, funded by cash reserves, is part of the company’s comprehensive refinancing program. Following this, and pending the sale of the Hilton La Jolla Torrey Pines, all of Braemar’s debt obligations due in 2024 have been settled or refinanced.

Moreover, Braemar’s commitment to optimizing its capital structure is further demonstrated by its plan to redeem $50 million worth of its non-traded and/or public preferred stock within the year, using proceeds from the Hilton Torrey Pines sale. This redemption will effectively eliminate the accruing dividends on these securities.

Adding to its strategic financial initiatives, Braemar’s Board of Directors has approved a new stock repurchase program valued at up to $50 million. The company intends to initiate these repurchases promptly, with the specifics of the transactions depending on market conditions. This program can be adjusted, suspended, or terminated at the discretion of the company.

Richard J. Stockton, President and CEO of Braemar, expressed his views on these developments: “Today’s announcements reflect our commitment to reduce the Company’s dividend and interest expense, enhance our capital structure and financial flexibility, as well as create value for our shareholders. The planned sale of the Hilton La Jolla Torrey Pines at an attractive cap rate, demonstrates the high-quality nature of the Braemar portfolio. We continue to be excited about the future prospects for Braemar.”

Braemar Hotels & Resorts operates as a real estate investment trust (REIT) with a focus on high-end hotel and resort properties, aiming to generate long-term value for its shareholders through strategic investments and capital management.

Braemar’s strategic decisions highlight a well-calculated approach to capital management and asset optimization. The sale of Hilton La Jolla Torrey Pines not only frees up capital for further investments and debt repayment but also reflects a prudent asset management strategy in today’s volatile market. This, combined with the stock buyback and preferred share redemption, indicates a robust plan to enhance shareholder returns and financial stability.

  Braemar Hotels & Resorts Inc, Hilton La Jolla Torrey Pines sale, luxury hotel investments, Real estate investment trust, shareholder value enhancement