Braemar acquires Puerto Rico resort for $186M

Braemar Hotels & Resorts has entered into a definitive agreement to acquire the 96-room Dorado Beach, a Ritz-Carlton Reserve in Dorado, Puerto Rico. In addition, the company is also acquiring the income stream attributable to 14 residential units adjacent to the property that participate in a rental management program. The acquisition is expected to close on or before Feb. 1, 2022, subject to certain customary closing conditions. 

"The acquisition of Dorado Beach, a Ritz-Carlton Reserve is an opportunity for us to acquire one of the most iconic luxury assets in the Americas," said Richard J. Stockton, Braemar's president and CEO. "As the first Ritz-Carlton Reserve in the Americas and one of only five Ritz-Carlton Reserve properties worldwide, this unique property fits perfectly with our strategy of owning high [revenue per available room] luxury hotels and resorts and further diversifies our portfolio." 

The property is situated within Dorado Beach Resort, a 1,900-acre master planned community along Puerto Rico’s northern coast. Dorado is an upscale suburb of San Juan with restaurants, retail outlets and leisure activities in the surrounding area. The town is 20 miles from Old San Juan and 22 miles from Luis Muñoz Marin International Airport.

Dorado Beach, a Ritz-Carlton Reserve opened in 2012 and underwent a $78 million renovation in 2018. It has 96 guestrooms that average 1,288 square feet in size. Public spaces include the five-acre Spa Botanico, three food-and-beverage outlets, more than 4,800 square feet of meeting space and an infinity pool with direct access to the beach. 

The Financials

While not included in the property's fee simple collateral, the acquisition includes the income from 14 additional residential units, ranging in size from 2,200 to 6,600 square feet, which are part of a rental management program. 

The total consideration for the acquisition is $186.6 million ($1.7 million per key, inclusive of the residential units in the rental program). The acquisition will be funded with approximately $104 million of cash, 6 million shares of common stock and the assumption of a $54 million mortgage loan. No additional equity will be issued to fund the cash portion of the consideration. The cash portion of the consideration will be funded from available excess cash. 

The purchase price represents, based on forecasted financial results for 2021, a capitalization rate of 9.8 percent on hotel net operating income of $18.2 million and a 10.2 times hotel earnings before interest, taxes, depreciation and amortization multiple, according to the company's preliminary estimates based on unaudited operating financial data provided by the seller. The company expects to realize a stabilized yield of approximately 8 percent on its investment in the next three to five years. On a trailing 12-month basis as of Nov. 30, 2021, the property achieved revenue per available room of $1,129, with 57 percent occupancy and an average daily rate of $1,968, according to unaudited operating financial data provided by the seller.