Braemar Hotels & Resorts Inc. · NYSE:BHR
Braemar Hotels & Resorts — Investor Day (October 2018)
54 slides from Braemar Hotels & Resorts's investor day presentation, Oct 2, 2018
Slide 1: Braemar Hotels & Resorts Investor Day October 2018
gfe = BRAEMAR HOTELS & RESORTS investor Day October 2018
Slide 2: Forward Looking Statements and Non-GAAP Measures
Forward Looking Statements and Non-GAAP Measures In keeping with the SEC's "Safe Harbor" guidelines, certain statements made during this presentation could be considered forward- looking and subject to certain risks and uncertainties that could cause results to differ materially from those projected
Slide 3: Vision for Braemar
V i s i o n Vision for Braemar Richard Stockton Chief Executive Officer Hotels & Resorts . 20 years of hospitality experience - Differentiate the Company . 2 years with the Company - Focus on Luxury Segment . 15 years with Morgan Stanley . - Deliver Strong Returns to Cornell School of Shareholders H
Slide 4: Achieving the Vision
Achieving the Vision Sell Non-Core Assets Upbrand Non-Core Assets Acquire Luxury Assets Rebrand Company 4
Slide 5: Sold Two Non-Core Assets
Sold Two Non-Core Assets November 2017 May 2018 Marriott Plano, TX Renaissance Tampa, FL $104.0M Sales Price $68.0M Sales Price 7.7% All-in Cap Rate 8.2% All-in Cap Rate $134 RevPAR $158 RevPAR 11.1x EBITDA Multiple 10.0x EBITDA Multiple 5 Note: All metrics are as of the time of disposition
Slide 6: Achieving the Vision
Achieving the Vision R Sell Non-Core Assets Upbrand Non-Core Assets Acquire Luxury Assets Rebrand Company 6
Slide 7: Upbranding Update Courtyard Philadelphia
Upbranding Update Courtyard Philadelphia • Brand change: Autograph • Expected RevPAR uplift: $25 • Estimated unlevered IRR: 19% • Incremental investment: $19.8 million • Estimated completion date: 6/30/2019 Construction Timing (Completion): Guestrooms 10/18 – 6/19 Lobby 12/18 – 4/19 Restaurant 1/19
Slide 8: Upbranding Update Courtyard San Francisco
Upbranding Update Courtyard San Francisco • Brand change: Autograph • Expected RevPAR uplift: $50 • Estimated unlevered IRR: 22% • Incremental investment: $28.9 million • Estimated completion date: 12/31/2019 Construction Timing (Completion): Guestrooms 9/18 – 12/18 Lobby 2/19 – 10/19 Restaurant 2/1
Slide 9: Achieving the Vision
Achieving the Vision R Sell Non-Core Assets R Upbrand Non-Core Assets Acquire Luxury Assets Rebrand Company 9
Slide 10: Acquired Three Luxury Assets
Acquired Three Luxury Assets PARK HYATT BEAVER CREEK HOTEL YOUNTVILLE RITZ-CARLTON SARASOTA BEAVER CREEK, CO YOUNTVILLE, CA SARASOTA, FL $145.5 million $96.5 million $171.5 million 190 # Rooms 80 # Rooms 266 # Rooms $766K Per Key $1.2M Per Key $643K Per Key 6.0% TTM Cap Rate 6.2% TTM Cap Rate 6.0% T
Slide 11: Cost of Capital
COST OF CAPITAL WACC: 6.2% - 7.9% 2014 2015 Weight Cost Weight Cost 10.0% Equity 551,752 43.5% 7.7% 487,739 36.3% 9.8% 9.5% Debt 715,829 56.5% 5.0% 791,392 58.9% 4.7% 9.0% Preferred 0 0.0% 65,000 4.8% 5.5% Total $ 1,267,581 $ 1,344,131 8.5% WACC 6.2% 6.6% 8.0% 7.5% WACC 2016 2017 7.0% Weight Cost We
Slide 12: Achieving the Vision
Achieving the Vision R Sell Non-Core Assets R Upbrand Non-Core Assets R Acquire Luxury Assets Rebrand Company 12
Slide 13: NYSE Closing Bell April 24, 2018
NYSE Closing Bell April 24, 2018 13
Slide 14: Achieving the Vision
Achieving the Vision R Sell Non-Core Assets R Upbrand Non-Core Assets R Acquire Luxury Assets R Rebrand Company 14
Slide 15: Our Portfolio: Luxury Hotels & Resorts
O U R P O R T F O L I O L U X U R Y H O T E L S & R E S O R T S
Slide 16: EBITDA Contribution by Class
EBITDA Contribution (1) Q4 2016 TTM EBITDA by Class Q2 2018 TTM EBITDA by Class 21% 20% 27% 46% 46% 54% 34% 52% Luxury Upper Upscale Upscale Luxury Upper Upscale Upscale 16 (1) Pro forma for Autograph conversions
Slide 17: High Quality Portfolio Diversified in Leading Urban & Resort Markets
High Quality Portfolio D i v e r s i f i e d i n L e a d i n g U r b a n & R e s o r t M a r k e t s 17
Slide 18: Our Strategy
iy : Mf Veni — ee ' 2 _ The - Ss as ou wee OUR STRATEGY
Slide 19: Why Luxury Hotels?
WHY LUXURY HOTELS? PRICING POWER LOWER SUPPLY THREATS CURRENT MACROECONOMIC SUPERIOR RevPAR TRENDS MAGNIFYING GROWTH GROWTH 19
Slide 20: Why We Focus on Luxury
Why We Focus on Luxury LUXURY UPPER UPSCALE Greatest long-term Second greatest long- RevPAR growth of term RevPAR growth of 4.0%(1) 3.1%(1) 350 300 250 200 150 100 50 Jul-93 Jul-04 Jul-15 Jun-94 Jun-05 Jun-16 Apr-96 Apr-07 Apr-18 Jan-88 Jan-99 Jan-10 Feb-98 Feb-09 Sep-91 Sep-02 Sep-13 Oct-90 Oct-01
Slide 21: RevPAR Growth Trends
REVPAR GROWTH TRENDS % A N N U A L G R O W T H 7.0 6.6 5.0 5.0 4.0 6.0 4.0 4.0 3.9 4.9 5.0 3.0 2.8 3.0 4.5 4.0 3.7 2.0 2.0 1.7 3.5 3.2 3.0 3.0 1.0 1.0 2.3 2.3 2.1 2.0 1.9 0.0 0.0 2018 FORECAST 2019 FORECAST 1.0 Average of Other Classes Average of Other Classes 0.5 Luxury Luxury 0.0 Q1 Q2 Q3 Q4 Q1 Q2
Slide 22: Target Market Analysis
Target Market Analysis(1) Market Size Fundamentals Pricing Desirability 60 50 40 30 20 10 0 Fundamentals Market Size Pricing 22 (1) Based on internal analysis as of 6/30/2018
Slide 23: Our Performance: Historically Proven
O U R P E R F O R M A N C E H I S T O R I C A L L Y P R O V E N
Slide 24: Past Operating Performance Relative to Peers
Past Operating Performance R e l a t i v e t o P e e r s Braemar has outperformed its REIT peers each of the past 3 years (Braemar results in green or red; REIT averages in black) RevPAR Growth 2015 2016 2017 2018 Q2 YTD 7.3% 2.4% -2.5% (0.6%)(1) -5.0% (1.5%)(1) 4.2% 1.7% -0.2% 1.2% Hotel EBITDA Gro
Slide 25: Capital Strategy
Capital Strategy Focus on Expanding Margins and Increasing NOI by Aggressive Asset Management and Strategic CapEx Spend CapEx Hotel EBITDA Margins $50 31.3% $43 $45 31.0% 31.1% 31.0% $40 30.9% $35 $32 30.7% $30 30.5% $25 $23 $19 30.3% $20 (In Millions $) Millions (In 30.1% 30.0% $15 29.9% $10 29.9%
Slide 26: Yield on Cost
Yield on Cost A g g r e s s i v e A s s e t M a n a g e m e n t Legacy +26% +19bps $120M 16% NOI Growth Annual Incremental Value Value Portfolio Yield on Cost Created(1) Created(1) In Millions $ 2013 2014 2015 2016 2017 2018 Q2 TTM Gross Book Value $ 682.3 $ 698.6 $ 705.9 $ 719.8 $ 744.7 $ 761.8 Cap
Slide 27: Best-in-Class Asset Management
Best- in- Class Jeremy Welter Asset Management Chief Operating Officer - Operating Performance . 13 years of hospitality experience - Value-Add Initiatives . 8 years with the - CapEx Investments Company (5 years with the Company’s predecessor) . 5 years with Stephens Investment Bank . Oklahoma State
Slide 28: Asset Management Overview
Asset Management O v e r v i e w TEAM 1 - Co-President & COO 10 - Asset Managers 400+ Years of Collective Hospitality 3 - Revenue Optimization Experience 4 - CapEx Specialists 3 - Risk & Insurance 3 - Legal 140+ Years at Ashford 1 - Property Tax Specialist 1 - Director of Analytics 13 Graduate Degre
Slide 29: Past Operating Performance Relative to Peers
Past Operating Performance R e l a t i v e t o P e e r s HOTEL EBITDA % CHANGE 2015 2016 2017 2018(1) BHR 8.5% 3.7% 0.2% 3.9% PEER AVG. 8.3% 2.5% -2.3% 0.1% 18% Cumulative Growth 16% BHR 14% Peer Avg. Nearly 4 Straight 12% Years of 10% Outperformance 8% 6% 2015 2016 2017 2018 29 (1) YTD June 2018 4
Slide 30: Hilton La Jolla Torrey Pines Case Study
Hilton La Jolla Torrey Pines C a s e S t u d y – P e r f o r m a n c e RevPAR Index is up 840bps from 2013 Highlights - Enforcement of group $15.0 $14.7 attrition fees $14.0 Hotel EBITDA $13.0 - Energy savings initiatives - F&B pricing increases $12.0 $11.0 - Implemented resort fee $) Millions (In $
Slide 31: Courtyard San Francisco Downtown Autograph Conversion
Courtyard San Francisco Downtown O p p o r t u n i t y – A u t o g r a p h C o n v e r s i o n Autograph Courtyard $28,900,000 Converted Brand Current Brand Incremental CapEx Investment $320 $269 RevPAR RevPAR $371 $312 ADR ADR $18.5m $14.6m EBITDA EBITDA 33.7% 31.8% EBITDA Margin EBITDA Margin 22.4
Slide 32: Courtyard San Francisco Downtown Autograph Conversion
Courtyard San Francisco Downtown O p p o r t u n i t y – A u t o g r a p h C o n v e r s i o n Guestrooms Lobby Lounge/Bar 32 Restaurant Exterior
Slide 33: Courtyard San Francisco Downtown Performance Under Renovation
Courtyard San Francisco Downtown C a s e S t u d y – P e r f o r m a n c e U n d e r R e n o v a t i o n 110 RevPAR Index Renovation Period 105 100 95 90 (1) 2015 2016 2017 2018 Minimized displacement Energy savings initiatives Closed unprofitable F&B outlet Increased parking rate 33 4 (1) YTD July
Slide 34: Courtyard Philadelphia Downtown Autograph Conversion
Courtyard Philadelphia Downtown O p p o r t u n i t y – A u t o g r a p h C o n v e r s i o n Courtyard Autograph $19,800,000 Converted Brand Current Brand Incremental CapEx Investment $166 $191 RevPAR RevPAR $201 $232 ADR ADR $12.3m $14.5m EBITDA EBITDA 34.0% 35.1% EBITDA Margin EBITDA Margin 19.4%
Slide 35: Ritz-Carlton St. Thomas Rebuild/Enhance
Ritz-Carlton St. Thomas O p p o r t u n i t y - R e b u i l d / E n h a n c e Highlights - New guestrooms ~$80M - New lobby Insurance Proceeds - New expanded pre- function & meeting space $20M - Repositioning restaurant CapEx Spend - New concierge lounge - New fitness center 2019 Q4 - Enhanced kids
Slide 36: Hotel Yountville Remington Takeover
Hotel Yountville C a s e S t u d y - R e m i n g t o n T a k e o v e r Strategy -Implemented digital marketing -Established a sales team to increase group bookings -Created synergies between Hotel Yountville and Bardessono Hotel & Spa -Replaced expensive YTD July 2017 Prior YTD July 2018 Post reserv
Slide 37: Key Additions Room Additions
Key Additions C a s e S t u d y – R o o m A d d i t i o n s Property (2014 - 2017) Keys ADR Hilton Capital 6 $238 Courtyard San Francisco Downtown 3 270 Marriott Seattle Waterfront 3 272 Courtyard Philadelphia Downtown 1 177 Total/Weighted Average: 13 $249 Estimated $6.8M added in (1) asset value Co
Slide 38: Capital Hilton CVS Deal
Capital Hilton O p p o r t u n i t y - C V S D e a l Deal Highlights • Leasing 8,785 Sq. Ft plus 4,465 of basement space • New amenity for guests • Replaces short-term tenant, MINT, with strong credit- worthy long-term tenant • 20-year term with tenant option for 2 additional renewal options of 5 ye
Slide 39: Marriott Seattle Performance
Marriott Seattle C a s e S t u d y – P e r f o r m a n c e Nearly 5 years of RevPAR Index growth Strategy $250 122 - Increased group production RevPAR $240 120 during shoulder months by 37% RevPAR Index $230 118 - Upgraded from lower rated $220 27% crew to higher rated crew 116 $210 114 - Revamped m
Slide 40: Ancillary Revenue Opportunity Project Alpha
Ancillary Revenue O p p o r t u n i t y – P r o j e c t A l p h a Implementing aggressive strategy to increase ancillary revenue by making sure that our fees are competitive with the market $1.8M $100K $100K $1.4M R E S O R T F E E S PARKING FEES E A R L Y A R R I V A L O T H E R C H A R G E S & L A
Slide 41: Proprietary Business Analytics Tool
Proprietary Business Analytics Tool O p p o r t u n i t y Revenue Outlook Next 6-Months 12-Aug 19-Aug 26-Aug 2-Sep Outlook Hotel Manager AM WoW Chg. Pace WoW Chg. Pace WoW Chg. Pace WoW Chg. Pace WoW Chg. Pace Ahead, Gaining Courtyard Philadelphia Downtown Marriott Adam Tegge $ 6,125 $ 171,598 $ (2,
Slide 42: Portfolio RPI Growth
Portfolio RPI Growth S t r o n g P o r t f o l i o P o s i t i o n i n g YTD(1) T-3(1) Total Portfolio Market Share Gain 90bps 290bps COURTYARD COURTYARD HILTON LA JOLLA SAN FRANCISCO PHILADELPHIA TORREY PINES Top 3 Assets YTD(1) RPI Growth 1,200BPS 720BPS 440BPS COURTYARD COURTYARD HOTEL YOUNTVILLE
Slide 43: 2019 Portfolio Performance Opportunity
2019 Portfolio Performance O p p o r t u n i t y - P o r t f o l i o P o s i t i o n Marriott Seattle Sofitel Chicago Courtyard Philadelphia Park Hyatt Beaver Creek Downtown Capital Hilton Hilton La Jolla Torrey Pines Pier House Resort & Spa Bardessono Hotel & Spa Ritz-Carlton St. Thomas Courtyard S
Slide 44: Balance Sheet
Balance Sheet Deric Eubanks Chief Financial Officer - Target Leverage . 18 years of hospitality experience - Cash Management . 15 years with the - Debt Strategy Company . CFA Charterholder . Southern Methodist University, BBA
Slide 45: Conservative Capital Structure
Conservative Capital Structure TARGET LEVERAGE OVERVIEW Floating-rate debt provides a natural hedge to hotel cash Non-recourse debt lowers flows and maximizes 45% risk profile of the platform flexibility in all economic environments Gross Assets Proactive strategy to Long-standing lender opportunist
Slide 46: Cash Management Strategy
Cash Management Strategy NET WORKING CAPITAL(1) Cash & Cash Equivalents $163.0 10-15% 17% $5.49 Restricted Cash $81.5 Accounts Receivable, net $21.2 CASH TO GROSS Prepaid Expenses $4.1 CASH TO GROSS DEBT TARGET NWC / SHARE DEBT(1) Due from Affiliates $0.0 Due from Third-Party Hotel Managers, net $3.
Slide 47: Debt Maturities Overview
Debt Maturities Overview 2020 2.1x 4.6% NEXT HARD DEBT FCCR(1) WEIGHTED AVG. MATURITY INTEREST RATE(1) Laddered debt maturities(1) 600 500 400 300 $535.0 Millions $) Millions (In (In 200 100 $188.3 $158.5 $112.0 0 2018 2019 2020 2021 2022 Thereafter Fixed-Rate Floating-Rate 47 (1) As of 6/30/2018, a
Slide 48: Valuation: Intrinsic Value
V A L U A T I O N I N T R I N S I C V A L U E
Slide 49: Valuation Relative to Peers
Valuation R e l a t i v e t o P e e r s (1),(2) ULTIPLE(1),(2) TEV/ KEY TEV / 2018E EBITDA M $600,000 17.0x 16.0x $500,000 16.0x 15.3x 15.5x 15.0x 14.5x $400,000 14.0x 13.4x $300,000 13.0x 12.4x 12.0x 11.6x $200,000 11.0x $100,000 10.0x 9.0x $0 BHR DRH SHO Peer CHSP LHO PEB DRH SHO BHR Peer CHSP LHO
Slide 50: Intrinsic Value: Valuation Disconnect
Intrinsic Value(1),(2) V a l u a t i o n D i s c o n n e c t Current Equity Implied Equity Implied Equity Market Cap(3) Market Cap(4) Value Upside $436M $817M $381M BRAEMAR PORTFOLIO $946 87% Increase $817 (In millions $) Low-End High-End $687 TTM NOI(5),(7) $108.6 $108.6 Cap Rate(6) 7.0% 6.0% $43
Slide 51: Appendix
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Slide 52: Reconciliation of Net Income (Loss) to Hotel NOI
Reconciliation of Net Income (Loss) to Hotel NOI Three Months Ended Three Months Ended Three Months Ended Three Months Ended TTM Ended June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2018 Net income (loss) $ 38,623 $ 16,761 $ 35,206 $ 10,705 $ 101,295 Non-property adjustme
Slide 53: Reconciliation of Net Income (Loss) to Cash Available for Distribution
Reconciliation of Net Income (Loss) to Cash Available for Distribution Three Months Ended Three Months Ended Three Months Ended Three Months Ended TTM Ended June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 March 31, 2018 Net income (loss) $ 12,854 $ 4,270 $ 28,444 $ (217) $ 45,351 (
Slide 54: Braemar Hotels & Resorts Investor Day October 2018
gfe = BRAEMAR HOTELS & RESORTS investor Day October 2018
Braemar Hotels & Resorts — Investor Day (October 2018) on 6ix