Key facts
- Braemar Hotels & Resorts will pay Ashford Inc. a $480 million termination fee.
- The luxury hotel REIT is separating from its longtime manager, Ashford Inc.
- Braemar plans to become a self-managed public company.
- The company is selling three hotels to help fund the termination fee.
- Braemar will appoint five new independent board members and retain its CEO.
Braemar Hotels & Resorts is terminating its management agreements with Ashford Inc., its longtime manager, and becoming a self-managed real estate investment trust (REIT). The decision comes after a failed sale process, during which Braemar agreed to pay Ashford a $480 million termination fee. The company announced Friday that it will cancel contracts with two Ashford subsidiaries and sell some assets to fund this fee.
Braemar plans to simplify its corporate structure, recruit five new independent board members, and retain the majority of its eight luxury hotels across the U.S. and the Caribbean. The REIT disclosed in a June 4 SEC filing that it is under contract to sell three hotels, including the Ritz-Carlton in Sarasota, Florida, for $437.5 million, to help cover the termination costs. Braemar's President and CEO Richard Stockton stated that with in-house management and a focus on efficiency, the company will be better positioned for long-term profitability.
The move follows scrutiny over the proposed sale, with concerns raised by shareholders and Barron's about potential conflicts of interest, as a significant portion of the sale proceeds would have gone to Bennett, despite the REIT's substantial value loss. Braemar's shares have fallen nearly 90% since its split from Ashford Hospitality Trust in 2013. The company expects to save approximately $25 million annually in administrative costs by directly hiring current Ashford management and relocating its headquarters.