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New words:
Aareal, Alpine, amenity, AON, automobile, break, bringing, broker, burdensome, Cameo, classic, Coe, defend, Disability, DSC, effectuate, flair, flat, footprint, FSB, geopolitical, guarantor, hourly, Justin, lien, LXR, meal, mediated, mediation, mediator, menu, MidFirst, Moderno, Netdiligence, nonrefundable, Northern, onboarding, outlook, outsourcing, overseen, overview, PAGA, perfected, plc, posture, receivership, recessionary, Republic, Russia, shielded, Silicon, southern, split, Stirling, straight, submission, succeeding, sunset, Sweep, Syndicate, TBK, Ukraine, unrecognized, unreimbursed, unstable, Vice, Warwick
Removed:
administrator, Aid, Answer, ARRC, benchmark, Carlo, carried, concept, Concurrent, correctly, counterclaim, declaration, declaratory, deferral, embedded, EPS, execution, forfeiture, fraudulent, freestanding, host, indexed, instrument, intention, Kingdom, LLP, Monte, murphy, negligent, notifying, Nunneley, refinanced, regulator, remitted, replacing, retrospective, returned, simulation, smaller, Subtopic, Supreme, trademark, vi, week, wrongfully
Financial report summary
?Risks
- A financial crisis, economic slowdown, pandemic, or epidemic or other economically disruptive event may harm the operating performance of the hotel industry generally. If such events occur, we may be impacted by declines in occupancy, average daily room rates and/or other operating revenues.
- Economic conditions in the United States could have a material adverse impact on our earnings and financial condition.
- Our cash, cash equivalents and investments could be adversely affected if the financial institutions in which we hold our cash, cash equivalents and investments fail.
- We are required to make minimum base advisory fee payments to our advisor, Ashford Inc., under our advisory agreement, which must be paid even if our total market capitalization and performance decline. Similarly, we are required to make minimum base hotel management fee payments under our hotel management agreements with Remington Hospitality, a subsidiary of Ashford Inc., which must be paid even if revenues at our hotels decline significantly.
- Our business is significantly influenced by the economies and other conditions in the specific markets in which we operate, particularly in the metropolitan areas where we have high concentrations of hotels.
- Our investments are concentrated in the hotel industry, and our business would be adversely affected by an economic downturn in that sector.
- We face risks related to changes in the global economic and political environment, including capital and credit markets.
- We invest in the luxury segments of the lodging market, which are highly competitive and generally subject to greater volatility than most other market segments and could negatively affect our profitability.
- Because we depend upon Ashford LLC and its affiliates to conduct our operations, any adverse changes in the financial condition of Ashford LLC or its affiliates or our relationship with them could hinder our operating performance.
- We depend on Ashford LLC’s key personnel with long-standing business relationships. The loss of Ashford LLC’s key personnel could threaten our ability to operate our business successfully.
- The aggregate amount of fees and expense reimbursements paid to our advisor will exceed the average of internalized expenses of our industry peers (as provided in our advisory agreement), as a percentage of total market capitalization. As a part of these fees, we must pay a minimum advisory fee to our advisor regardless of our performance.
- Our business strategy depends on acquiring additional hotel properties on attractive terms and the failure to do so or to otherwise manage our planned growth successfully may adversely affect our business and operating results.
- There is no guarantee that Ashford Trust will sell us any of the properties that are subject to the right of first offer agreement.
- We may be unable to successfully integrate and operate acquired properties, which may have a material adverse effect on our business and operating results.
- Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturers.
- Hotel franchise or management agreement requirements or the loss of such an agreement could adversely affect us.
- We do not have any employees, and rely on our hotel managers to employ the personnel required to operate the hotels we own. As a result, we cannot control staffing at our hotels. Additionally, our reliance on third-party hotel managers to operate our hotels and for a substantial majority of our cash flow may adversely affect us.
- Our management agreements could adversely affect our ability to sell or finance our hotel properties.
- Ten of our hotels currently operate under Marriott or Hilton brands; therefore, we are subject to risks associated with concentrating our portfolio in just two brand families.
- If we cannot obtain additional capital, our growth will be limited.
- Some of our hotels are subject to ground leases; if we are found to be in breach of a ground lease or are unable to renew a ground lease, our business could be materially and adversely affected.
- In any eminent domain proceeding with respect to a hotel, we will not recognize any increase in the value of the land or improvements subject to our ground leases or at expiration and may only receive a portion of compensation paid.
- The expansion of our business into new markets outside of the United States will expose us to risks relating to owning hotels in those international markets.
- Compliance with international laws and regulations may require us to incur substantial costs.
- Exchange rate fluctuations could adversely affect our financial results.
- We are increasingly dependent on information technology, and cyber-attacks, security problems or other disruption and expanding social media vehicles present new risks.
- We may experience losses caused by severe weather conditions or natural disasters.
- Changes in laws, regulations or policies may adversely affect our business.
- We may from time to time be subject to litigation, which could have a material adverse effect on our financial condition, results of operations, cash flow and trading price of our common stock.
- We have a significant amount of debt, and our organizational documents have no limitation on the amount of additional indebtedness that we may incur in the future.
- Higher interest rates have increased our debt payments and such debt payments may remain high.
- We may enter into other transactions that could further exacerbate the risks to our financial condition. The use of debt to finance future acquisitions could restrict operations, inhibit our ability to grow our business and revenues, and negatively affect our business and financial results.
- Covenants, “cash trap” provisions or other terms in our mortgage loans and our senior convertible notes, as well as any future credit facility, could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.
- There is refinancing risk associated with our debt.
- Our hedging strategies may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on an investment in our Company.
- Our separation and distribution agreement, our advisory agreement, the original master hotel management agreement, the original mutual exclusivity agreement and other agreements entered into in connection with the spin-off, as well as the master project management agreement, the master hotel management agreement, the hotel management MEA and the project management MEA entered into in connection with Ashford Inc.’s August 2018 acquisition of Premier and the ERFP Agreement were not negotiated on an arm’s-length basis with an unaffiliated third party, and we may pursue less vigorous enforcement of the terms of the current agreements because of conflicts of interest with certain of our executive officers and directors and key employees of Ashford LLC.
- Ashford LLC was a subsidiary of Ashford Trust until its spin-off and may be able to direct attractive investment opportunities to Ashford Trust and away from us.
- Ashford LLC and its employees, some of whom are our executive officers, face competing demands relating to their time and this may adversely affect our operations.
- We provide funds to Ashford Inc. to fund the formation, registration and ongoing funding needs of Ashford Securities, which could result in certain conflicts of interest. There can be no assurance Ashford Securities will continue to be successful in helping us raise capital.
- Conflicts of interest with Remington Hospitality and Premier, each of which is a subsidiary of Ashford Inc., could result in our management acting other than in our stockholders’ best interest.
- Ashford Inc.’s ability to exercise significant influence over the determination of the competitive set for any hotels managed by Remington Hospitality could artificially enhance the perception of the performance of a hotel, making it more difficult to use managers other than Remington Hospitality for future properties.
- Remington Hospitality may be able to pursue lodging investment opportunities that compete with us.
- Our fiduciary duties as the general partner of our operating partnership could create conflicts of interest, which may impede business decisions that could benefit our stockholders.
- Our conflicts of interest policy may not adequately address all of the conflicts of interest that may arise with respect to our activities.
- We are subject to general risks associated with operating hotels.
- Declines in or disruptions to the travel industry could adversely affect our business and financial performance.
- We may have to make significant capital expenditures to maintain our hotel properties, and any development activities we undertake may be more costly than we anticipate.
- The hotel business is seasonal, which affects our results of operations from quarter to quarter.
- The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could have a material adverse effect on our business and operating results.
- Many of our real estate-related costs are fixed, and will not decrease even if revenue from our hotels decreases.
- The increasing use of Internet travel intermediaries by consumers may adversely affect our profitability.
- Our revenues and profitability may be adversely affected by increased use of business-related technology, which may reduce the need for business-related travel.
- Future terrorist attacks or changes in terror alert levels could materially and adversely affect our business.
- We are subject to risks associated with the employment of hotel personnel, particularly with respect to hotels that employ unionized labor.
- Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our hotel properties and harm our financial condition.
- Increases in property taxes would increase our operating costs, reduce our income and adversely affect our ability to make distributions to our stockholders.
- The costs of compliance with or liabilities under environmental laws may harm our operating results.
- Tax increases and changes in tax rules may adversely affect our financial results.
- Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.
- Compliance with the ADA and fire, safety, and other regulations may require us to incur substantial costs.
- We may experience uninsured or underinsured losses.
- Our earnings are dependent, in part, upon the performance of our investment portfolio.
- Our prior investment performance is not indicative of future results.
- Our investment portfolio will likely contain investments concentrated in a single industry and will not be fully diversified.
- Our charter contains provisions that may delay or prevent a change of control transaction.
- Our board of directors may create and issue an additional class or series of common stock or preferred stock without stockholder approval.
- Certain provisions in the partnership agreement for our operating partnership may delay or prevent unsolicited acquisitions of us.
- Because provisions contained in Maryland law and our charter may have an anti-takeover effect, investors may be prevented from receiving a “control premium” for their shares.
- Certain provisions of Maryland law could inhibit changes in control.
- Our board of directors can take many actions without stockholder approval.
- Our rights and the rights of our stockholders to take action against our directors and officers are limited.
- Future issuances of securities, including our common stock and preferred stock, could reduce existing investors’ relative voting power and percentage of ownership and may dilute our share value.
- Failure to qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders.
- Even if we qualify and remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.
- Failure to make required distributions would subject us to U.S. federal corporate income tax.
- Our TRS structure increases our overall tax liability.
- If our leases with our TRS lessees are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT.
- Our ownership of TRSs is limited and our transactions with our TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.
- If our hotel managers, including Ashford Hospitality Services LLC and its subsidiaries (including Remington Hospitality) do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.
- Complying with REIT requirements may cause us to forego otherwise attractive opportunities.
- Complying with REIT requirements may force us to liquidate otherwise attractive investments.
- Complying with REIT requirements may force us to borrow to make distributions to stockholders.
- We may in the future choose to pay taxable dividends in our common stock instead of cash, in which case stockholders may sell our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.
- The prohibited transactions tax may limit our ability to dispose of our properties.
- The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.
- Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
- We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our securities.
- If our operating partnership failed to qualify as a partnership for U.S. federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences.
- Qualifying as a REIT involves highly technical and complex provisions of the Code.
- Declines in the values of our investments may make it more difficult for us to maintain our qualification as a REIT or exemption from the Investment Company Act.
- Broad market fluctuations could negatively impact the market price of our stock.
- Future offerings of debt securities, which would be senior to our common stock upon liquidation, and future offerings of equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock.
- The number of shares available for future sale could adversely affect the per share trading price of our common stock.
- The market price of our common stock could be adversely affected by our level of cash distributions.
- Our stock repurchase program could increase the volatility of the price of our common stock.
Management Discussion
- Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
- This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
- We are a Maryland corporation formed in April 2013 that invests primarily in high revenue per available room (“RevPAR”), luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by STR, LLC. Two times the U.S. national average was $196 for the year ended December 31, 2023. We have elected to be taxed as a REIT under the Code. We conduct our business and own substantially all of our assets through our operating partnership, Braemar OP.