TLDR: Braemar Hotels & Resorts 5.50% Series B Cumulative Convertible Preferred (BHR-PB) trades around $13 against a $25.00 liquidation preference with an effective yield of 10%. The company is selling trophy hotels, litigating with its largest shareholder, and paying its chairman’s management company $480 million to go away.Bring some popcorn and don’t feed the monkeys!Thanks for reading Triple S Special Situations Investing! Subscribe for free to receive new posts and support my work.The Sordid HistoryBraemar was spun out of Ashford Hospitality Trust (AHT) in 2013 by Monty Bennett to hold the crown jewels of hotels with the highest-RevPAR luxury portfolio of any lodging REIT.Ritz-Carltons, Four Seasons, places that I am too cheap to stay at.Here at TripleS, we are для народа, but I digress….Great assets. One problem. His name is on the management contract. 💩The REIT was externally advised by Ashford Inc., which Bennett controls, and which spent thirteen years extracting fees while the stock price and the value of the portfolio drifted further and further apart.The activists noticed and went after the company to break it up.BHR announced a formal sale process and a termination agreement paying Ashford $480 million to walk awayYes, you heard this right, they paid themselves half a billion dollars to go away ahead of creditors and shareholders. 💩 💩The company’s largest shareholder, Mr. Wafic Said of Al Shams Investments, wrote the board a nasty letter and threatened the board of directors with a lawsuit over this payment along with a full proxy slate for election in the 2026 meeting.“I am not by nature a confrontational person. But what has been done to Braemar’s shareholders is a moral outrage—a calculated act of greed by an individual who has manipulated the rules of governance purely for personal enrichment, with complete disregard for the investors he is supposed to serve. I feel an obligation—not merely a right—to stand up for those shareholders who cannot fight this alone. We will pursue this to its conclusion. We will act—swiftly and without restraint. “The company responded by disclosing Ashford so generously cut their payment from $574 million saving $94.3 million. And they are lovely people and that Mr. Wafic Said who is the largest shareholder, owning ~10% of the company, is, per a BBC report the company gleefully cites, a ‘former arms dealer’ whose UK political donations to Boris Johnson were allegedly routed through his wife.I have no opinion on Mr. Said’s life history, but to be honest, if he was a former arms dealer, I wouldn’t steal money from one and honestly, he seems a lot cleaner than management of this company.Now, to be clear Al Shams isn’t the only person out there calling for change. Brancous LP put out this press release this week.For nearly two years, shareholders have been asking for the same things:Reduce the Ashford termination payment.Appoint a truly independent Board.Instead, in our opinion, the Board has wasted Company resources suing shareholders, sending cease-and-desist letters, and publishing press releases attacking the owners of the Company.You aren’t selling the Company for a premium. We believe you are stripping the Company of its “iconic” hotels to pay a “Monty Tax” that we estimate equals approximately $7.00 per share—nearly three times where the stock trades today.I think there is no doubt that the company to date has been behaving poorly.The question is how they will behave going forward.Blackwells Capital also put out a letter saying:We recognize that other shareholders, including Zazove Associates, have separately raised related questions about the economics of Braemar's advisory arrangement, generally through formal SEC filings rather than sustained public campaigns. We consider these to be legitimate questions, and we are encouraged that a number of them have already been substantially addressed: a renegotiation of the Company Sale Fee payable to Ashford Inc. that reduced the amount owed by approximately $94.3 million, the retention of Ferguson Partners to identify new independent directors, a commitment to more than $25 million in annual cost savings as a self-managed company, and record-setting asset sale prices for which the Company deserves credit.In our view, continued public escalation by Brancous at this stage does not serve the interests of Braemar's shareholders, and we do not believe it reflects the views of the Company's shareholder base as a whole. The transition to self-management is underway, asset sales intended to fund the separation from Ashford Inc. are progressing, and a reconstituted, independent Board is being assembled. We believe the more constructive path for all shareholders, including Brancous, is to allow this process to conclude, and to assess whether further steps, including a proposed special dividend, are warranted once momentum can be evaluated.So, how did this dumpster fire of a blood money payment get approved?The stated plan was originally the sale of the company which would have required a shareholder vote.A vote Al Shams was loudly promising to weaponize against the $480 million payment.Instead, this spring the company:Sold the Park Hyatt Beaver CreekAnnounced on June 4 an agreement to sell three more hotels: the Ritz-Carlton Sarasota, Hotel Yountville, and Bardessono for a combined $437.5 millionAnnounced on June 12 that the strategic review was over: no sale of the company. Braemar will terminate the Ashford advisory agreement, become a self-managed REIT, and remain publicly traded using the asset sale proceeds and balance sheet cash to pay Ashford its $480 million with no shareholder vote required.So, in summary, the asset sales triggered the fee, the fee got paid, Monty and every Ashford-affiliated director resign (except CEO Richard Stockton, Bennett’s longtime lieutenant).💩 💩 💩Ok, I will stop with the poop emojis as you get the picture.A search firm was hired to recruit five new independent directors and an independent chairman.The common stock fell buckets.So, what I expect next is a probable fiduciary-duty and/or derivative claims over the termination fee, and a proxy fight.And now you wonder, why am I recommending a yield vehicle in this mess?Why the Pref B, SpecificallyBraemar has four series of preferred, all pari passu, all $25 stated value:Only the B (5.5%) and D (8.25%) are publicly traded.Both are cumulative issuances, which is the only way I like my preferred. That means if they miss a payment, you are owed it in arrears.One tax note before you back up the truck is that REIT dividends are not qualified dividends, so you don’t get reduced income tax treatment like most preferred securities.They sit behind ~$1.1 billion of debt which is spread out over the next 4 years with interest rates in the SOFR + 3-4 range.That debt is essentially all property-level mortgages, and it will need refinancing on a rolling basis.Will spreads be higher or lower when it rolls? I don’t know and neither does anyone else.My guess is it won’t be a problem as they refinanced multiple hotels in the last two years with no issues.Due to the lower coupon, the B (13ish) trades at a lesser price than the D (17ish).If you are trading this security for principal upside and not just yield, you want a larger discount to face.The B preferred has two neat little features:If the company delists, winds up, or stops being a REIT, they must redeem the B’s for 103% of par.“REIT Termination and Listing Event Redemption. At any time (i) a REIT Termination Event (as defined below) occurs or (ii) the Common Stock fails to be listed on the NYSE, NYSE American, or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor thereto, the holder of Series B Cumulative Preferred Stock shall have the right to require the Company to redeem any or all shares of Series B Cumulative Preferred Stock at 103% of the liquidation preference in cash.A “REIT Termination Event” shall mean the earliest to occur of: (i) the filing of a federal income tax return by our Company for any taxable year on which we do not compute our income as a REIT; (ii) the approval by the stockholders of our Company of a proposal for us to cease to qualify as a REIT; (iii) the approval by our board of directors of a proposal for us to cease to qualify as a REIT; (iv) a determination by our board of directors, based on the advice of counsel, that we have ceased to qualify as a REIT; or (v) a “determination” within the meaning of Section 1313(a) of the Code that our Company has ceased to qualify as a REIT.”One catch worth knowing is that if the delisting happens as part of a change of control, the put doesn’t apply. You’re relying on the buyer choosing to redeem at $25 (which acquirers customarily do) but I’ve seen situations where it doesn’t happen.Also, if they stop paying dividends for six quarters, the rate increases to 7.5%. We obviously don’t want this to happen.The Series B Preferred Stock accrues a cumulative cash dividend at an annual rate of 5.50% on the $25.00 per share liquidation preference. Whenever dividends on any shares of Series B Preferred Stock are in arrears for six or more quarterly dividend periods, whether or not consecutive, the dividend rate will increase to 7.50% per annum until all accumulated, accrued but unpaid dividends on the Series B Preferred Stock have been paid in full, at which time the dividend rate will revert to 5.50% per annum.I think there is certainly a scenario where this company gets fully sold at some point in the near future once the stink of the previous management is fully expunged thereby paying out the preferred.And here’s a sanity check I like even though I wouldn’t touch the common.The common still trades around $2. It’s been in that neighborhood for a couple of years.It fell after the June announcement, but it didn’t fall to pennies.The market is telling you it believes there’s asset value left over after the debt, after Monty’s millions, and after the entire preferred waterfall gets paid at $25.The NumbersAt Q1 2026 this was operationally a very good hotel company with a very bad capital structure with results shown below:Hotel REITS always tend to look terrible on GAAP earnings due to deprecation on their expensive properties.Braemar also had Ashford’s massive advisory fees, taking out a chunk of the cash flow.We also know the hotels they sold received a premium price, so the asset coverage is there if even the cashflow starts to falter a bit.I don’t really see huge issues in covering the preferred dividend, but if more stupid deals get done, that could be a fatal statement by me.One final thing to note is the Ritz-Carlton is driving the majority of the revenue, so there is some concentration risk:Effective Yield & Payout ScenariosAt ~$13.7, the Series B yields ~10% current, but the coupon is the boring part.If the company liquidates, you can collect an 80% upside on the principal plus dividends so likely a 2X which is a large return for a pref stock.If the status quo continues and the last of the questionable people are gone, you clip your 10% yield while a cleaned-up, Ashford-free, luxury REIT with no external-manager poison pill becomes the most obvious takeover candidate in the sector.The worst case scenario is that the luxury lodging rolls over, and the remaining assets fetch nothing like recent comps, litigation eats up all the value and the board defers preferred dividends.I think this is unlikely as we are in a K shaped economy and the rich all invested in Sandisk so they are happy to hang out at the Ritz and not the Holiday Inn Express like me.ConclusionI’ve spent twenty years watching terrible companies and managers. Braemar might be one of the finest specimens of the genre I’ve ever seen with a $480 million goodbye kiss to the chairman’s own management company, structured to dodge a shareholder vote, with a billionaire promising to sue everyone.I wouldn’t touch the common with a ten-foot pole. But the Series B preferred is a different animal that is worth a punt as I have an extremely high-risk toleranceEither this ends in sales, a takeover, or a liquidation and the pref goes to $25 or it drags on and I get paid 10%+ to watch this circus and feed those monkeys.As a final reminder, I will be presenting my largest current gold company investment at this conference for those who care to join. See you there. If you enjoyed this write-up, please like and restack.I don’t get paid to do this, so consider that my reward.Substack seems to throttle free article writers, which makes attracting new readers difficult. I do not want to charge for this substack, but the algorithm may end up requiring it. 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