Braemar Hotels & Resorts fell 8.3% to $3.42 on Tuesday after Sessa Capital Management filed preliminary proxy materials with the SEC, marking the firm's second board challenge since 2022. The $550 million market-cap REIT has delivered a negative 32% total return over the past twelve months, trailing the FTSE Nareit Lodging Index by 47 percentage points.
Sessa disclosed a 9.8% stake and nominated four directors to replace Braemar's seven-member board, citing persistent operational underperformance and what it termed "strategic drift" in the company's 13-property portfolio of luxury and upper-upscale hotels. The activist's letter to shareholders, filed March 2025, detailed $87 million in asset sales since 2023 that yielded proceeds below net asset value estimates, and criticized management for maintaining a $340 million debt load at floating rates through the 2022-2023 rate cycle without adequate hedging. Braemar's shares trade at 0.62x book value, a 38% discount to lodging REIT peers.
The proxy fight arrives as lodging fundamentals inflect positive—U.S. RevPAR grew 3.1% in January 2025, the strongest start to a year since 2019, according to STR data. Braemar's portfolio, concentrated in San Francisco, Santa Monica, and Chicago, faces specific headwinds: downtown office occupancy in San Francisco remains at 47%, pressuring corporate transient demand that historically drove 62% of Braemar's room nights. The company reported $118 million in trailing twelve-month EBITDA, down 14% year-over-year, with same-store RevPAR declining 6.2% in Q4 2024. Management attributed the weakness to group cancellations and deferred capital expenditures totaling $35 million across three flagship properties.
Sessa's campaign targets both capital allocation and asset management. The activist proposes accelerating dispositions of three non-core assets—estimating $140 million in gross proceeds—to reduce leverage and fund repositioning capex at higher-ROI properties. It also questions Braemar's external management agreement with Ashford Inc., which extracts a 0.7% base fee on gross assets plus incentive fees, a structure increasingly rare among hotel REITs after peers like RLJ Lodging internalized management in 2021. Braemar paid Ashford $8.3 million in fees during 2024 on $1.16 billion in gross assets, equivalent to 7.0% of EBITDA.
The proxy contest will test whether institutional holders—who control 76% of shares outstanding—believe incumbent CEO Deric Eubanks and Chairman Richard Stockton can execute a turnaround or whether Sessa's nominees, including two former Starwood executives, offer a credible alternative. Proxy advisory firms ISS and Glass Lewis typically scrutinize second-time activists more skeptically, but Braemar's underperformance provides numerical support for governance change. The company has until April 18 to file its response and present its own slate.
Operators and allocators should watch three datapoints: Braemar's Q1 2025 earnings on May 8, which will show whether San Francisco occupancy stabilized above 65% after two tech conferences in March; any announcement of asset sales or refinancing before the June 12 annual meeting; and whether ISS issues a voting recommendation by May 29, which historically sways 18-22% of retail votes in contested lodging REIT elections. The outcome determines whether a $550 million portfolio gets repositioned under new oversight or whether management retains control to execute its existing three-year plan through 2027.
Braemar's floating-rate debt matures in November 2026, giving the winning board roughly 18 months to demonstrate RevPAR stabilization before refinancing negotiations begin.
The takeaway
Sessa's second proxy fight at Braemar tests whether $550M hotel REIT's board survives after trailing peers by 47 points and trading at 38% discount to book.
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