Braemar Hotels & Resorts Inc. (NYSE: BHR) (“Braemar” or the “Company”) today announced it has entered into a definitive agreement to acquire the 138-room Mr. C Beverly Hills Hotel in Los Angeles, California (the “Mr. C” or the “Property”). In addition, the Company is also acquiring five luxury condominium residences adjacent to the hotel. The acquisition is expected to close on or prior to July 9, 2021, subject to customary closing conditions. Because the acquisition is subject to customary closing conditions, the Company can give no assurance that the transaction will be consummated by such date or at all.
“The acquisition of the Mr. C is an opportunity for us to acquire an irreplaceable luxury property in a premier location in the heart of West Los Angeles,” said Richard J. Stockton, Braemar’s President and Chief Executive Officer.
“This property fits perfectly with our strategy of owning high RevPAR luxury hotels and resorts and further diversifies our portfolio. We are excited to announce our first acquisition in the midst of the current industry recovery cycle. This is a complicated transaction that involves OP units, warrants, and mortgage debt. I’m proud of our entire team’s effort. Also, with Remington’s proven ability to maximize operating performance, we are excited about the future prospects for this renowned Los Angeles mainstay. Our prior corporate term loan had restrictive covenants that not only severely limited our capital expenditure program, prohibited property dispositions, and disallowed common dividends, but also would not have allowed us to complete this acquisition. By repaying that loan with the proceeds from our recent convertible notes offering, we have not only eliminated these constraints, but are now also able to pursue this acquisition.”
With its premier location in the heart of West Los Angeles, the Property is in the middle of over 45 million sq. ft. of office space, supporting substantial corporate demand and a wide array of world-renowned leisure demand generators, including unrivaled shopping with high-end retailers, vibrant restaurants and various art and cultural attractions. Beverly Hills, just to the north of the Property, contains 4.5 million sq. ft. of Class A office space and houses some of the most famous tenants on the West Coast, including Google, Apple, Live Nation, and the Academy of Motion Picture Arts and Sciences. Additionally, the Property is just minutes from Century City, Los Angeles’ largest collection of upscale Class A office space containing over 8.2 million sq. ft. of space and housing companies like Creative Artists Associates, 21st Century Fox Studios, and AECOM’s worldwide headquarters. Beyond the first-class hotel experience, guests have easy access to the Los Angeles area’s many amenities and activities, including world-class beaches, amusement parks, sporting events, boating, fishing, hiking, golfing, and skiing.
The Mr. C was built in 1965 and underwent an extensive renovation in 2011. It has 138 luxurious and spacious rooms, including 22 suites. The hotel offers an array of amenities, including a full-service spa, and three food and beverage outlets (in addition to in-room dining). The property also boasts the acclaimed The Restaurant at Mr. C, over 24,000 sq. ft. of flexible indoor/outdoor meeting space, a 4,500 sq. ft. outdoor pool terrace with daybeds and cabanas, state-of-the-art fitness center with personal fitness training, and a business center. Additionally, the Property includes five newly-constructed and fully-furnished residences offering the hotel’s personalized services and luxurious, world-class amenities. These residences blend contemporary architecture with elegant, minimalistic design and range in size from 2,000 to 3,400 sq. ft. The residences are currently offered for extended-stay rental.
The Mr. C has been the recipient of the following awards:
- AAA Four Diamond Lodging Award
- Forbes Travel Guide Four-Star Award – Hotel
- Conde Nast Traveler – Reader’s Choice Award
The total consideration for the acquisition is $77.9 million and consists of $65.4 million for the hotel ($474,000 per key) and an allocated price of $12.5 million for the five adjacent condominium units. The acquisition will be funded with approximately $30 million of cash (the majority of which will be used to paydown existing debt), 2.5 million OP units, 500,000 warrants at a strike price of $6.00, and a $30 million mortgage loan. The purchase price for the Mr. C represents, as of December 31, 2019, a trailing 12-month capitalization rate of 5.0% on hotel net operating income of $3.9 million and a trailing 12-month 16.5x hotel EBITDA multiple, according to the Company’s preliminary estimates based on unaudited operating financial data provided by the sellers. The Company expects to realize a stabilized yield of over 8% on its investment in the next three to five years. On a trailing 12-month basis as of December 31, 2019, the Property achieved RevPAR of $251.14, with 75% occupancy and an average daily rate (ADR) of $334.40, according to unaudited operating financial data provided by the sellers.
Braemar Hotels & Resorts is a real estate investment trust (REIT) focused on investing in luxury hotels and resorts.
