Place all ingredients, except butter and liquid smoke, into a medium saucepan. Simmer mixture over medium to medium-low heat for 5 minutes, stirring often. If the sauce is too thick, add about 1 tablespoon more water at a time until you reach your preferred consistency.
Once sugars have melted through and sauce is well combined, remove saucepan from heat , stir in liquid smoke and butter. Let sauce cool for 10-15 minutes before using. Ideally, this sauce should be made the day before to give the flavors a chance to mellow.
Store sauce in an air tight container in the refrigerator for up to 5 days after initial preparation. Sauce should be served at room temperature.