Braemar Hotels & Resorts Inc. · NYSE:BHR
Braemar Hotels & Resorts — Investor Presentation (March 2019)
34 slides from Braemar Hotels & Resorts's investor presentation, Mar 7, 2019
Slide 1: Braemar Hotels & Resorts March 2019
BRAEMAR March 2019 HOTELS & RESORTS
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: Management Team
Management Team RICHARD J. STOCKTON Chief Executive Officer & DERIC S. EUBANKS, CFA JEREMY J. WELTER President Chief Financial Officer Chief Operating Officer . . 21 years of hospitality . 19 years of hospitality 14 years of hospitality experience experience experience . . 2 years with the Company .
Slide 4: Strategic Overview
Strategic Overview Focused strategy of investing in luxury hotels and resorts Bardessono Hotel & Spa Grow organically through strong revenue and cost Yountville, CA control initiatives Grow externally through accretive acquisitions of high quality assets Pier House Resort Key West, FL Targets conser
Slide 5: 2018 Q4 Hotel Operating Results
2018 Q4 Hotel Operating Results Comparable Hotel Operating Results(1) 2018 Q4 2017 Q4 % Variance ADR $ 269.24 $ 255.23 5.5% Occupancy 75.6% 77.3% (2.2)% RevPAR $ 203.51 $ 197.23 3.2% RevPAR (not under renovation) $ 224.16 $ 209.56 7.0% Total Hotel Revenue(2) $ 98,871 $ 99,754 (0.9)% Hotel EBITDA(2)
Slide 6: 2018 Q4 Highlights and Results
2018 Q4 Highlights and Results Quarter Highlights • During the quarter, the Company completed a $40.0 million offering of its 8.25% Series D Preferred Stock • Subsequent to quarter end, the Company entered into a new Enhanced Return Funding Program agreement with Ashford Inc. • Subsequent to quarter
Slide 7: Recent Developments: Enhanced Return Funding Program
Recent Developments Enhanced Return Funding Program Implemented(1) Reduces equity requirement . $50 million ERFP commitment from AINC on new qualifying acquisitions by 18% with ability to upsize to $100 million by mutual consent $50M ERFP Allocation(2) . Initial 2-year term with 1-year renewals . ER
Slide 8: Recent Developments: Ritz-Carlton Lake Tahoe Acquisition
Recent Developments January 2019 We recently acquired the 170-room Ritz-Carlton Lake Raised $40.0 million of perpetual preferred stock. Tahoe, in Truckee, California for $103.3 million(1) Dividends accrue at a rate of 8.25% per annum. 754.2 817.6 124.1 124.1 11.5% 40.0 Preferred ($ Millions)in($ 443
Slide 9: High-Quality Hotels in Leading Urban & Resort Markets
High-Quality Hotels in Leading Urban & Resort Markets Courtyard Philadelphia Philadelphia, PA Capital Hilton Hotel Yountville The Ritz-Carlton Lake Tahoe Marriott Seattle Sofitel Chicago Magnificent Mile Washington D.C. Yountville, CA Lake Tahoe, CA Seattle, WA Chicago, IL Capital Hilton Washington
Slide 10: Portfolio Detail
Portfolio Detail • Core portfolio quality unparalleled in the $236 $226 public lodging REIT sector • Geographically diversified portfolio CORE REVPAR(1) OVERALL REVPAR(1) located in strong markets Number of TTM TTM TTM TTM Hotel % of (1) (1) (1) (1) Core Location Rooms ADR OCC RevPAR EBITDA Total Ba
Slide 11: 2019 Potential Performance Catalysts
2019 Potential Performance Catalysts Year Over Year RevPAR Potential Comparisons(1) 2019 Q1 2019 Q2 2019 Q3 2019 Q4 Wildfires Rebound Bardessono Wildfires Rebound Hotel Yountville Low Snowfall Rebound Park Hyatt Beaver Creek New Rooms/New Sofitel Chicago Mgmt. Irma Rebound Pier House Ritz-Carlton St
Slide 12: Upbranding Status Update – Autograph Conversions
Upbranding Status Update – Autograph Conversions Courtyard San Francisco • Investment cost: $28.9 million • Expected RevPAR uplift: $50 • Estimated unlevered IRR: 22%(1) Construction Timing (Completion) Guestrooms Done Restaurant 2/19 - 10/19 Lobby 2/19 - 10/19 Exterior 4/19 - 11/19 SAN FRANCISCO Co
Slide 13: Ritz-Carlton St. Thomas Update
Ritz-Carlton St. Thomas Update • Launched central reservations on June 29, 2018 as St. Thomas Great Bay Resort to allow transient room nights to be booked directly on Marriott.com and OTA channels • Permanent roof work is completed • Guestroom model rooms were completed and reviewed with brand in Ju
Slide 14: EBITDA Contribution by Brand and Class
EBITDA Contribution by Brand and Class 2018 Hotel EBITDA by Brand 2018 Hotel EBITDA by Class 6% 7% 20% 17% 49% 47% 21% 33% Marriott Hilton Independent Hyatt Accor Luxury Upper Upscale Upscale Company Presentation // March 2019 14
Slide 15: Why We Focus on Luxury – Historical Performance
Why We Focus on Luxury – Historical Performance 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 RevPAR(Indexed) 50 Jul-05 Jul-90 Jul-95 Jul-00 Jul-10 Jul-15 Jan-88 Jan-93 Jan-98 Jan-03 Jan-08 Jan-13 Jan-18 S
Slide 16: Luxury Outlook - 2019
Luxury Outlook - 2019 Luxury is expected to continue to outperform other chain scales in 2019 Chain Scale Occupancy ADR RevPAR Luxury (0.5) 3.8 3.3 Upper Upscale (1.0) 3.0 1.9 Upscale (0.8) 2.3 1.5 Upper Midscale (0.5) 1.7 1.2 Midscale (0.7) 1.9 1.2 Economy 0.0 2.3 2.4 Independent (0.3) 2.9 2.6 U.S.
Slide 17: External Growth – Luxury Markets
External Growth – Luxury Markets ~270,000 total luxury hotel rooms in U.S.(1) TOP 15 LUXURY MARKETS BY ROOMS(1) TOP 15 LUXURY MARKETS BY REVPAR(1)(2) Market Hotels Rooms Market RevPAR Las Vegas, NV 18 26,108 Hawaii $ 443.5 New York, NY 63 15,435 Utah Area $ 388.2 Los Angeles/Long Beach, CA 62 12,535
Slide 18: Target Market Analysis
Target Market Analysis(1) Market Size Fundamentals Pricing Desirability 50 45 40 35 30 25 20 15 10 5 0 Fundamentals Market Size Pricing Source: STR, RCA, and Bloomberg 18 Company Presentation // March 2019 (1) Based on internal analysis as of 9/30/2018
Slide 19: Long-Term Trading Premium
Long-Term Trading Premium(1) The top quartile of lodging REITs (by RevPAR) have consistently had higher quality assets and 2.4 traded at a premium relative to other peers over PREMIUM EBITDA TRADING MULTIPLE a long-term 10 year period (TURNS) 25.0x 23.0x 21.0x 19.0x 17.0x 15.0x 13.0x 11.0x 9.0x 7.0x
Slide 20: Asset Management Overview
Asset Management Overview(1) Senior Oversight 1 – Chief Operating Officer 8 – Asset managers 2 – Legal 1 – Director of Underwriting 2 – Revenue Optimization 1 – Analyst 1 – Analyst 4 – Capex specialists Acquisition Revenue Underwriting Optimization Risk Expense Management Control 3 – Risk & Insuranc
Slide 21: Past Operating Performance Relative to Peers
Past Operating Performance Relative to Peers • Braemar has outperformed its REIT peers each of the past 4 years (Braemar results in green or red; REIT averages in black) RevPAR Growth 2015 2016 2017 2018 7.3% 2.4% -2.5%(1) -1.6%(2) 4.9% 1.5% 0.4% 2.4% Comparable Hotel EBITDA Growth 2015 2016 2017 20
Slide 22: Case Study – Pier House Resort
Case Study – Pier House Resort • Braemar purchased the asset in early 2014 for $92.7 million • Remington had recently taken over property management & has a proven ability to deliver superior results • Initial yield on cost was 7.4%, yield on cost at December 31, 2018 was 10.2% 2016 Quarterly NOI an
Slide 23: Case Study – Bardessono Hotel & Spa
Case Study – Bardessono Hotel & Spa • Purchased for $85 million unencumbered by management. Installed Remington as property manager. • Initial TTM cap rate was 4.6%, yield on cost at December 31, 2018 was 8.5% Quarterly NOI and NOI Yield $6,000 9.0% 8.0% $5,000 $1,356 7.0% $4,000 $1,238 6.0% 2016 (F
Slide 24: Conservative Capital Structure
Conservative Capital Structure TARGET LEVERAGE OVERVIEW Floating-rate debt Non-recourse debt typically provides a 45% lowers risk profile of natural hedge to the overall platform hotel cash flows Gross Assets Intended to Maximize flexibility in Long-standing lender Net Debt all economic relationship
Slide 25: Cash Management Strategy
Cash Management Strategy NET WORKING CAPITAL(1) Cash & Cash Equivalents $175.6 CASH TO GROSS DEBT Restricted Cash $74.2 10-15% TARGET Accounts Receivable, net $12.1 Prepaid Expenses $4.2 Due from Third-Party Hotel Managers, net $3.4 Investment in Ashford Inc.(2) $11.9 Total Current Assets $281.4 $40
Slide 26: Debt Maturities
Debt Maturities Courtyard Philadelphia OVERVIEW Philadelphia, PA 2020 2.0x 4.8% NEXT HARD DEBT FCCR(1)(2) WEIGHTED AVG. MATURITY INTEREST RATE(1)(2) Laddered debt maturities(1)(2) $800.0 $700.0 $600.0 $500.0 $400.0 $684.0 $300.0 (In millions)(In $200.0 $100.0 $158.5 $112.0 $0.0 $100.0 $0.0 2019 2020
Slide 27: Peer Operating Performance Analysis
Peer Operating Performance Analysis Comparable Hotel EBITDAPAR & Comparable Hotel EBITDA Margins 2018 $120 35% 32.4% 31.3% 32.3% 30.3% 30% $110 $109 30.9% 25% $100 $95 20% $90 15% $82 $83 $80 $80 10% $70 5% $60 0% BHR PEB SHO CHSP DRH 2018 EBITDAPAR (LHS) 2018 EBITDA Margins (RHS) Company Presentati
Slide 28: Valuation
Valuation 2018 Comparable RevPAR(1) BHR $226 Valuation PEB $205 100 1.3 4.1 CHSP $195 Discount to Discount to Discount to average peer average peer average peer trading cap trading EBITDA trading AFFO SHO $192 rate (bps) multiple (turns) multiple (turns) DRH $187 TTM CAP RATE(2) TEV / 2019E EBITDA M
Slide 29: Highly Aligned Management Team
Highly Aligned Management Team 13.6% Management has significant personal wealth invested in the Company 3.6x Insider ownership 3.6x higher than REIT industry average $64M Total dollar value of insider ownership (as of 2/27/2019) 20.0% 18.0% 16.8% 16.0% Highly-aligned management team is among 14.0% 1
Slide 30: Key Takeaways
Key Takeaways Highest Quality Portfolio Amongst All Lodging REITs…In The Segment With Greatest Expected Growth Trajectory Bardessono Hotel & Spa Growing Organically: Rigorous Asset Management Yountville, CA While Mining Portfolio for Investment Opportunities Growing Externally: Redeploying Capital i
Slide 31: Appendix
Appendix
Slide 32: 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 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2018 Net income (loss) $ (13,913) $ (626) $ 12,854 $ 4,270 $ 2,5
Slide 33: Reconciliation of Net Income (Loss) to Comparable Hotel EBITDA
Reconciliation of Net Income (Loss) to Comparable Hotel EBITDA Three Months Ended Three Months Ended Three Months Ended Three Months Ended TTM Ended December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2018 Net income (loss) $ 6,525 $ 14,567 $ 38,623 $ 16,761 $ 76,476 Non-p
Slide 34: Reconciliation of Net Income (Loss) to Adjusted EBITDAre
Reconciliation of Net Income (Loss) to Adjusted EBITDAre Three Months Ended Year Ended December 31, December 31, 2018 2017 2018 2017 Net income (loss) $ (13,913) $ 28,444 $ 2,585 $ 28,324 Interest expense and amortization of loan costs 13,712 10,194 49,653 38,937 Depreciation and amortization 15,092
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