Braemar Sells Pier House Resort & Spa to Sixth Street for US$190 Million Amid REIT Shift

Key West Asset Divested

Braemar Hotels & Resorts has completed the sale of its Pier House Resort & Spa in Key West, Florida. Global investment firm Sixth Street acquired the luxury property for US$190 million. This transaction, finalised recently, represents a significant step for Braemar.

The company is actively pursuing a strategic shift towards becoming a self-managed real estate investment trust (REIT). Additionally, the sale supports Braemar's ongoing efforts to deleverage its portfolio.

Richard Stockton, Braemar's Chief Executive Officer, stated this move demonstrates "meaningful progress." He noted its importance in the company's management spin-out from Ashford Inc. Sixth Street completed the acquisition in partnership with Riller Capital.

Strategic Reorientation Underway

The divestment of Pier House Resort & Spa aligns with Braemar's broader strategic reorientation. This reorientation involves a clear focus on luxury hotel assets. The company concluded a monthslong strategic review process in June. This review had commenced in August of last year. Braemar announced plans to terminate its advisory agreement with Ashford Inc. and its affiliates.

The aim is to transition into a self-managed REIT. This decision, however, has faced opposition from Al Shams Investments Limited, Braemar's largest shareholder. Over the past year, Braemar has actively sold several properties. These sales include the Marriott Seattle Waterfront for US$145 million. In May, the Park Hyatt Beaver Creek Resort & Spa in Colorado was sold to Sixth Street for US$176 million.

Further Divestments and Portfolio Focus

Further demonstrating its deleveraging and refocusing strategy, Braemar completed more sales in July. The Ritz-Carlton Sarasota in Florida was divested. Alongside this, Hotel Yountville and the Bardessono Hotel and Spa, both located in Yountville, California, were sold. These three properties collectively generated US$437.5 million.

Braemar's CEO, Richard Stockton, previously indicated the company's intent to sharpen its focus on the luxury hotel sector. As part of its business transition, Braemar plans to maintain a portfolio of approximately six to eight luxury properties. These assets will be situated across the United States and the Caribbean.

Stockton also reported that the majority of Braemar's luxury portfolio delivered "exceptional property-level performance" during the second quarter.

Property Details and Market Implications

The Pier House Resort & Spa features 142 keys and spans five oceanfront acres. It is strategically positioned at the gateway of Duval Street, Key West's primary thoroughfare. The property offers guests a range of amenities, including two dining venues, a full-service spa, and a fitness centre.

It also provides a swimming pool, private beach frontage, and approximately 3,000 square feet of meetings and events space. Aman Gupta, a principal at Sixth Street, stated the investment aligns with their objective.

They aim to identify "high-quality hospitality assets where we can drive long-term value." Gupta further noted Pier House represents an opportunity to acquire a historic luxury resort. This acquisition occurs in one of the country's most supply-constrained and sought-after tropical leisure markets. Industry-wide, luxury hotel sales are projected to increase.

A June report by JLL attributes this trend to strong market fundamentals and strengthening capital markets. This reflects continued investor confidence in the luxury hospitality sector.