DALLAS—Braemar Hotels & Resorts Inc. (NYSE: BHR) (“Braemar” or the “Company”) today reported financial results and performance measures for the first quarter ended March 31, 2020. The comparable performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel EBITDA assume each of the hotel properties in the Company’s hotel portfolio as of March 31, 2020 were owned as of the beginning of each of the periods presented. Unless otherwise stated, all reported results compare the first quarter ended March 31, 2020 with the first quarter ended March 31, 2019 (see discussion below). The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. In the United States, federal and local government agencies implemented emergency declarations and issued restrictions on travel, implementation of social distancing protocols, stay at home orders, limitations on gatherings and mandates to close all non-essential businesses.
In response to the impact of COVID-19 on the hospitality industry, the Company is deploying numerous strategies and protocols to protect the health and safety of its employees, guests, partners, and communities where it operates. Additionally, the Company has taken steps to ensure that it has additional financial flexibility going forward to navigate this crisis, including:
Currently, the Company has temporarily suspended operations at 11 properties. The Company’s remaining 2 properties are operating at reduced levels.
The Company worked proactively with its property managers to aggressively cut operating costs at its hotels ultimately resulting in an approximate 90% reduction in property-level staffing.
The Company has significantly reduced its planned spend for capital expenditures for the year from a range of $45-$65 million to a range of $15-$25 million.
The Company has suspended its common dividend conserving approximately $6 million per calendar quarter.
The Company has completely drawn down its $75 million credit facility.
The Company has taken proactive and aggressive actions to protect liquidity and reduce corporate expenses through compensation reductions and the curtailment of expenses resulting in an approximate 25% reduction in corporate G&A and reimbursable expenses.
The Company estimates that its current monthly cash utilization at its hotels given their current state of either having suspended operations or operating in a limited capacity is approximately $10 million per month. The Company’s debt is all property-level, non-recourse debt (excluding its $75 million corporate credit facility) and the monthly interest is currently approximately $3 million per month. The Company’s run rate for corporate G&A and Advisory Fees is approximately $1.3 million per month.
The Company ended the quarter with cash and cash equivalents of $142 million and restricted cash of $45 million. The vast majority of the restricted cash is comprised of lender and manager held reserves. The Company is currently working with its property managers and lenders in order to utilize lender and manager held reserves to fund operating shortfalls. At the end of the quarter, there was also $17 million in due from third-party hotel managers, which is the Company’s cash held by one of its property managers which is also available to fund hotel operating costs.
Beginning on April 1, 2020, the Company did not make principal or interest payments on nearly all of its hotel loans, which constituted an “Event of Default” as such term is defined under the applicable loan documents. The Company is actively working with its lenders to arrange mutually agreeable forbearance agreements to reduce its near-term cash utilization and improve liquidity.
The anticipated negative impact of the COVID-19 crisis on economic activity and the hospitality industry continues to evolve. The crisis is expected to continue to impact the Company’s financial results during the second quarter of 2020 and beyond.
FINANCIAL AND OPERATING HIGHLIGHTS
Net loss attributable to common stockholders for the quarter was $15.5 million or $0.48 per diluted share.
Comparable RevPAR for all hotels decreased 14.8% to $206.90 during the quarter.
Adjusted funds from operations (AFFO) was $0.12 per diluted share for the quarter.
Adjusted EBITDAre was $18.5 million for the quarter.
Capex invested during the quarter was $7.5 million.
UPDATE ON BUSINESS INTERRUPTION INCOME
During the quarter, the Company recognized $3.6 million of business interruption (“BI”) income for the Ritz-Carlton St. Thomas related to lost profits for the period of December 2019 through February 2020 due to the impact of Hurricane Irma. The Company will continue to work with its insurers on the claims at the Ritz-Carlton St. Thomas.
At March 31, 2020, the Company had total assets of $1.8 billion and $1.1 billion of mortgage loans of which $49 million related to its joint venture partner’s share of the mortgage loan on the Capital Hilton and Hilton La Jolla Torrey Pines. The Company’s total combined mortgage loans had a blended average interest rate of 3.3%.
As of March 31, 2020, the Company had cash and cash equivalents of $141.8 million.
In light of the economic uncertainty arising from the COVID-19 pandemic and to protect liquidity, the Company and its Board of Directors announced a suspension of its previously announced 2020 common stock dividend policy. Accordingly, the Company did not pay a dividend on its common stock and common units for the first quarter ended March 31, 2020. The Board of Directors will continue to monitor the situation and assess future quarterly common dividend declarations.
As of March 31, 2020, the portfolio consisted of thirteen hotels.
Comparable RevPAR decreased 14.8% to $206.90 for all hotels on a 7.6% increase in ADR and a 20.8% decrease in occupancy.
HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS
The Company believes year-over-year Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin comparisons are more meaningful to gauge the performance of the Company’s hotels than sequential quarter-over-quarter comparisons. To help investors better understand the substantial seasonality in the Company’s portfolio, the Company provides quarterly detail on its Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin for the current and certain prior-year periods based upon the number of hotels in the Company’s portfolio as of the end of the current period. As the Company’s portfolio mix changes from time to time so will the seasonality for Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin.
“The uncertainty and global concern as a result of the devastating COVID-19 pandemic have generated significant challenges to the hospitality industry,” said Richard J. Stockton, Braemar’s President and Chief Executive Officer. “Our strategic actions in response to the crisis have been focused on ensuring the safety of our associates and guests, protecting our hotels and maintaining adequate levels of liquidity. As we look forward, we are fortunate to have started the year with a very well positioned portfolio, including recent renovations, that we expect to begin to ramp up in the second half of this year. Our leverage strategy has coped well with the pandemic and we look forward to continuing to deleverage as positive operating cash flows resume and our hotels return to profitability.”