UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM ~~10-Q/A~~

~~(Amendment No. 1)~~10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number: 001-35972

BRAEMAR HOTELS & RESORTS INC.

(Exact name of registrant as specified in its charter)


Maryland						46-2488594
(State or other jurisdiction of incorporation or organization)						(IRS employer identification number)

14185 Dallas Parkway
Suite 1200
Dallas
Texas						75254
(Address of principal executive offices)						(Zip code)

(972) 490-9600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

BHR

New York Stock Exchange

Preferred Stock, Series B

BHR-PB

New York Stock Exchange

Preferred Stock, Series D

BHR-PD

New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Common Stock, $0.01 par value per share						~~66,971,063~~65,993,893
(Class)						Outstanding at ~~January 31,~~August 3, 2023

~~EXPLANATORY NOTE~~

As previously reported in the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on February 1, 2023, the audit committee of Braemar Hotels & Resorts Inc. (the “Company”) concluded, after discussion with the Company’s management, that the Company’s unaudited financial statements for the periods ended September 30, 2022, included in its Quarterly Report on Form 10-Q filed with the SEC on November 7, 2022, contained a material misstatement and should not be relied upon. The misstatement related to the presentation of the Company’s statement of operations missing a non-cash item associated with the Company’s Series E Redeemable Preferred Stock and Series M Redeemable Preferred Stock, which impacted net income (loss) attributable to common stockholders and the related calculation of earnings per share for each period.

The purpose of this Amended Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2022 (this “Form 10-Q/A”), is to amend the Form 10-Q filed with the SEC on November 7, 2022 (the “Form 10-Q”) to restate the Company’s statements of operations for the three and nine months ended September 30, 2022, to include the impact of the $2.6 million and $4.8 million redemption value adjustment, respectively, associated with the Company’s Series E Redeemable Preferred Stock and Series M Redeemable Preferred Stock, which would have decreased/increased net income/loss attributable to common stockholders in the calculation of GAAP income/loss per share. See note 17 included herein for additional details.

This Form 10-Q/A is presented as of the filing date of the Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement. Accordingly, this Form 10-Q/A should be read in conjunction with the Company’s filings with the SEC subsequent to the date on which the Company filed the Form 10-Q. Among other things, forward-looking statements made in the original Form 10-Q have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Form 10-Q, and such forward-looking statements should be read in their historical context.

~~The following items have been amended as a result of the restatement:~~

~~Part I, Item 1, “Financial Statements”,~~

~~Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”,~~

~~Part I, Item 4, “Controls and Procedures”, and~~

~~Part II, Item 1A, “Risk Factors.”~~

In accordance with applicable SEC rules, this Amendment No. 1 on Form 10-Q/A includes an updated signature page and certifications of the Company’s Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2, 32.1 and 32.2 as required by Rule 12b-15.

The Company has concluded there was a material weakness in the Company’s internal control over financial reporting as of September 30, 2022 and that its disclosure controls and procedures were ineffective as of September 30, 2022. See additional discussion included in Part I, Item 4 of this amended quarterly report.

BRAEMAR HOTELS & RESORTS INC.

FORM ~~10-Q/A~~10-Q

FOR THE QUARTER ENDED ~~September~~June 30, ~~2022~~2023

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022			2
Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021 (restated)~~2022			3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			4
Condensed Consolidated Statements of Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			5
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			7
Notes to Condensed Consolidated Financial Statements ~~(restated)~~			9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			3532
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			55
ITEM 4. CONTROLS AND PROCEDURES			5556
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			56
ITEM 1A. RISK FACTORS			5657
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			57
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			57
ITEM 4. MINE SAFETY DISCLOSURES			58
ITEM 5. OTHER INFORMATION			58
ITEM 6. EXHIBITS			5758
SIGNATURES			5860

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited)

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share amounts)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Investments in hotel properties, gross	Investments in hotel properties, gross	$	2,055,773	$	1,845,078	Investments in hotel properties, gross	$	2,360,842	$	2,325,093
Accumulated depreciation	Accumulated depreciation	(431,303)		(399,481)		Accumulated depreciation	(470,484)		(440,492)
Investments in hotel properties, net	Investments in hotel properties, net	1,624,470		1,445,597		Investments in hotel properties, net	1,890,358		1,884,601
Cash and cash equivalents	Cash and cash equivalents	358,878		215,998		Cash and cash equivalents	128,025		261,541

Restricted cash	Restricted cash	53,932		47,376		Restricted cash	63,439		54,155
Accounts receivable, net of allowance of $197 and $134, respectively		27,158		23,701
Accounts receivable, net of allowance of $200 and $339, respectively						Accounts receivable, net of allowance of $200 and $339, respectively	32,864		51,448

Inventories	Inventories	4,540		3,128		Inventories	5,119		5,238

Prepaid expenses	Prepaid expenses	8,841		4,352		Prepaid expenses	18,172		7,044

Deferred costs, net						Deferred costs, net	75		—
Investment in unconsolidated entity	Investment in unconsolidated entity	1,797		1,689		Investment in unconsolidated entity	1,699		1,689
Derivative assets	Derivative assets	5,255		139		Derivative assets	6,308		6,482
Operating lease right-of-use assets	Operating lease right-of-use assets	79,719		80,462		Operating lease right-of-use assets	78,917		79,449
Other assets	Other assets	17,489		23,588		Other assets	17,078		14,621
Intangible assets, net	Intangible assets, net	3,977		4,261		Intangible assets, net	3,693		3,883

Due from related parties, net	Due from related parties, net	1,097		1,770		Due from related parties, net	333		938
Due from third-party hotel managers	Due from third-party hotel managers	22,941		27,461		Due from third-party hotel managers	15,430		26,625

Total assets	Total assets	$	2,210,094	$	1,879,522	Total assets	$	2,261,510	$	2,397,714
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Indebtedness, net	Indebtedness, net	$	1,236,864	$	1,172,678	Indebtedness, net	$	1,135,958	$	1,334,130

Accounts payable and accrued expenses	Accounts payable and accrued expenses	122,150		96,316		Accounts payable and accrued expenses	135,096		133,978
Dividends and distributions payable	Dividends and distributions payable	4,353		2,173		Dividends and distributions payable	8,917		8,184

Due to Ashford Inc.	Due to Ashford Inc.	8,891		1,474		Due to Ashford Inc.	4,558		10,005

Due to third-party hotel managers	Due to third-party hotel managers	1,514		610		Due to third-party hotel managers	1,579		2,096

Operating lease liabilities	Operating lease liabilities	60,771		60,937		Operating lease liabilities	60,538		60,692
Other liabilities	Other liabilities	20,265		20,034		Other liabilities	22,508		22,343
Derivative liabilities	Derivative liabilities	440		1,435		Derivative liabilities	165		284

Total liabilities	Total liabilities	1,455,248		1,355,657		Total liabilities	1,369,319		1,571,712
Commitments and contingencies (note 15)	Commitments and contingencies (note 15)					Commitments and contingencies (note 15)
5.50% Series B cumulative convertible preferred stock, $0.01 par value, 3,078,017 shares issued and outstanding at September 30, 2022 and December 31, 2021		65,426		65,426
Series E redeemable preferred stock, $0.01 par value, 8,880,432 and 1,710,399 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		204,252		39,339
Series M redeemable preferred stock, $0.01 par value, 1,066,934 and 29,044 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		26,274		715
5.50% Series B cumulative convertible preferred stock, $0.01 par value, 3,078,017 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						5.50% Series B cumulative convertible preferred stock, $0.01 par value, 3,078,017 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	65,426		65,426
Series E redeemable preferred stock, $0.01 par value, 16,485,987 and 12,656,529 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						Series E redeemable preferred stock, $0.01 par value, 16,485,987 and 12,656,529 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	379,403		291,076
Series M redeemable preferred stock, $0.01 par value, 1,959,622 and 1,428,332 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						Series M redeemable preferred stock, $0.01 par value, 1,959,622 and 1,428,332 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	48,405		35,182
Redeemable noncontrolling interests in operating partnership	Redeemable noncontrolling interests in operating partnership	40,635		36,087		Redeemable noncontrolling interests in operating partnership	35,174		40,555
Equity:	Equity:					Equity:
Preferred stock, $0.01 par value, 80,000,000 shares authorized:	Preferred stock, $0.01 par value, 80,000,000 shares authorized:					Preferred stock, $0.01 par value, 80,000,000 shares authorized:
8.25% Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at September 30, 2022 and December 31, 2021		16		16
Common stock, $0.01 par value, 250,000,000 shares authorized, 71,456,351 and 65,365,470 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		714		653
8.25% Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2023 and December 31, 2022						8.25% Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2023 and December 31, 2022	16		16
Common stock, $0.01 par value, 250,000,000 shares authorized, 65,993,893 and 69,919,065 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						Common stock, $0.01 par value, 250,000,000 shares authorized, 65,993,893 and 69,919,065 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	659		699
Additional paid-in capital	Additional paid-in capital	739,394		707,418		Additional paid-in capital	716,987		734,134
Accumulated deficit	Accumulated deficit	(307,745)		(309,240)		Accumulated deficit	(341,210)		(324,740)
Total stockholders’ equity of the Company	Total stockholders’ equity of the Company	432,379		398,847		Total stockholders’ equity of the Company	376,452		410,109
Noncontrolling interest in consolidated entities	Noncontrolling interest in consolidated entities	(14,120)		(16,549)		Noncontrolling interest in consolidated entities	(12,669)		(16,346)
Total equity	Total equity	418,259		382,298		Total equity	363,783		393,763
Total liabilities and equity	Total liabilities and equity	$	2,210,094	$	1,879,522	Total liabilities and equity	$	2,261,510	$	2,397,714

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			Three Months Ended June 30,				Six Months Ended June 30,
		(restated)				(restated)					2023		2022		2023		2022
REVENUE	REVENUE									REVENUE
Rooms	Rooms	$	104,503	$	77,560	$	322,222	$	195,720	Rooms	$	117,137	$	112,527	$	254,664	$	217,719
Food and beverage	Food and beverage	37,624		24,494		116,600		60,976		Food and beverage	47,776		42,269		100,004		78,976

Other	Other	19,062		14,123		59,141		40,439		Other	21,794		20,098		47,340		40,079
Total hotel revenue	Total hotel revenue	161,189		116,177		497,963		297,135		Total hotel revenue	186,707		174,894		402,008		336,774

EXPENSES	EXPENSES									EXPENSES
Hotel operating expenses:	Hotel operating expenses:									Hotel operating expenses:
Rooms	Rooms	25,424		17,072		69,742		41,569		Rooms	26,705		24,134		54,063		44,318
Food and beverage	Food and beverage	31,320		20,252		91,242		50,526		Food and beverage	36,365		31,894		76,104		59,922
Other expenses	Other expenses	50,836		36,124		149,130		98,143		Other expenses	56,297		52,087		118,592		98,294
Management fees	Management fees	5,116		3,595		14,802		9,079		Management fees	5,880		5,538		12,585		9,686
Total hotel operating expenses	Total hotel operating expenses	112,696		77,043		324,916		199,317		Total hotel operating expenses	125,247		113,653		261,344		212,220
Property taxes, insurance and other	Property taxes, insurance and other	8,851		12,622		22,731		27,076		Property taxes, insurance and other	9,396		5,277		17,512		13,880
Depreciation and amortization	Depreciation and amortization	19,604		18,284		57,616		54,881		Depreciation and amortization	22,567		19,571		45,088		38,012

Advisory services fee	Advisory services fee	8,854		4,809		22,481		16,343		Advisory services fee	8,215		6,305		16,163		13,627
(Gain) loss on legal settlements	(Gain) loss on legal settlements	—		—		(114)		(989)		(Gain) loss on legal settlements	—		(114)		—		(114)
Transaction costs		—		275		—		571

Corporate general and administrative	Corporate general and administrative	8,075		2,094		14,008		6,077		Corporate general and administrative	3,896		3,438		6,716		5,933
Total expenses		158,080		115,127		441,638		303,276
Gain (loss) on insurance settlement and disposition of assets		—		—		—		696
Total operating expenses										Total operating expenses	169,321		148,130		346,823		283,558

OPERATING INCOME (LOSS)	OPERATING INCOME (LOSS)	3,109		1,050		56,325		(5,445)		OPERATING INCOME (LOSS)	17,386		26,764		55,185		53,216
Equity in earnings (loss) of unconsolidated entity	Equity in earnings (loss) of unconsolidated entity	(74)		(68)		(220)		(198)		Equity in earnings (loss) of unconsolidated entity	(75)		(74)		(148)		(146)
Interest income	Interest income	745		13		932		34		Interest income	2,295		162		4,403		187
Other income (expense)		27		—		27		—

Interest expense and amortization of discounts and loan costs	Interest expense and amortization of discounts and loan costs	(14,490)		(8,364)		(33,293)		(22,346)		Interest expense and amortization of discounts and loan costs	(23,600)		(10,281)		(46,473)		(18,803)
Write-off of loan costs and exit fees	Write-off of loan costs and exit fees	(8)		(432)		(106)		(1,960)		Write-off of loan costs and exit fees	(248)		(22)		(260)		(98)

Unrealized gain (loss) on derivatives		2,403		142		4,019		64
Gain (loss) on extinguishment of debt										Gain (loss) on extinguishment of debt	—		—		2,318		—
Realized and unrealized gain (loss) on derivatives										Realized and unrealized gain (loss) on derivatives	1,029		1,208		695		1,616
INCOME (LOSS) BEFORE INCOME TAXES	INCOME (LOSS) BEFORE INCOME TAXES	(8,288)		(7,659)		27,684		(29,851)		INCOME (LOSS) BEFORE INCOME TAXES	(3,213)		17,757		15,720		35,972
Income tax (expense) benefit	Income tax (expense) benefit	(95)		(560)		(3,783)		(766)		Income tax (expense) benefit	75		(1,077)		(2,254)		(3,688)
NET INCOME (LOSS)	NET INCOME (LOSS)	(8,383)		(8,219)		23,901		(30,617)		NET INCOME (LOSS)	(3,138)		16,680		13,466		32,284
(Income) loss attributable to noncontrolling interest in consolidated entities	(Income) loss attributable to noncontrolling interest in consolidated entities	(823)		450		(2,265)		2,546		(Income) loss attributable to noncontrolling interest in consolidated entities	367		(1,468)		58		(1,442)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	1,166		823		(647)		3,184		Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	925		(846)		664		(1,813)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	(8,040)		(6,946)		20,989		(24,887)		NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	(1,846)		14,366		14,188		29,029
Preferred dividends	Preferred dividends	(6,028)		(1,977)		(13,395)		(6,258)		Preferred dividends	(10,877)		(4,064)		(21,227)		(7,367)
Deemed dividends on redeemable preferred stock		(2,649)		—		(4,802)		—
Gain (loss) on extinguishment of preferred stock		—		(111)		—		(4,595)
Deemed dividends on preferred stock										Deemed dividends on preferred stock	(301)		—		(2,755)		—

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(16,717)	$	(9,034)	$	2,792	$	(35,740)	NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(13,024)	$	10,302	$	(9,794)	$	21,662
INCOME (LOSS) PER SHARE - BASIC:	INCOME (LOSS) PER SHARE - BASIC:									INCOME (LOSS) PER SHARE - BASIC:
Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders	$	(0.24)	$	(0.15)	$	0.04	$	(0.73)	Net income (loss) attributable to common stockholders	$	(0.20)	$	0.14	$	(0.14)	$	0.31
Weighted average common shares outstanding – basic	Weighted average common shares outstanding – basic	70,956		59,207		69,213		48,954		Weighted average common shares outstanding – basic	65,806		70,740		68,378		68,325
INCOME (LOSS) PER SHARE - DILUTED:	INCOME (LOSS) PER SHARE - DILUTED:									INCOME (LOSS) PER SHARE - DILUTED:
Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders	$	(0.24)	$	(0.15)	$	0.04	$	(0.73)	Net income (loss) attributable to common stockholders	$	(0.20)	$	0.12	$	(0.14)	$	0.27
Weighted average common shares outstanding – diluted	Weighted average common shares outstanding – diluted	70,956		59,207		69,214		48,954		Weighted average common shares outstanding – diluted	65,806		107,669		68,378		98,798

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
NET INCOME (LOSS)	NET INCOME (LOSS)	$	(8,383)	$	(8,219)	$	23,901	$	(30,617)		NET INCOME (LOSS)	$	(3,138)	$	16,680	$	13,466	$	32,284
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX										OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

Total other comprehensive income (loss)	Total other comprehensive income (loss)	—		—		—		—			Total other comprehensive income (loss)	—		—		—		—
TOTAL COMPREHENSIVE INCOME (LOSS)	TOTAL COMPREHENSIVE INCOME (LOSS)	(8,383)		(8,219)		23,901		(30,617)			TOTAL COMPREHENSIVE INCOME (LOSS)	(3,138)		16,680		13,466		32,284
Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities	Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities	(823)		450		(2,265)		2,546			Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities	367		(1,468)		58		(1,442)
Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership	Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership	1,166		823		(647)		3,184			Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership	925		(846)		664		(1,813)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	(8,040)	$	(6,946)	$	20,989	$	(24,887)		COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	(1,846)	$	14,366	$	14,188	$	29,029

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in thousands except per share amounts)


		8.25% Series D Cumulative Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest in Consolidated Entities								Total			5.50% Series B Cumulative Convertible Preferred Stock									Series E Redeemable Preferred Stock								Series M Redeemable Preferred Stock								Redeemable Noncontrolling Interests in Operating Partnership					8.25% Series D Cumulative Preferred Stock				Common Stock						Additional Paid-in Capital		Accumulated Deficit			Noncontrolling Interest in Consolidated Entities									Total			5.50% Series B Cumulative Convertible Preferred Stock			Series E Redeemable Preferred Stock		Series M Redeemable Preferred Stock		Redeemable Noncontrolling Interests in Operating Partnership
		Shares	Amount		Shares	Amount										Shares			Amount			Shares			Amount				Shares				Amount				Redeemable Noncontrolling Interests in Operating Partnership				Shares		Amount				Shares							Amount		Additional Paid-in Capital					Shares					Total						Shares			Amount					Shares		Amount	Redeemable Noncontrolling Interests in Operating Partnership
Balance at June 30, 2022		1,600	$	16	71,310	$	712			$	738,353			$	(290,307)		$	(14,943)							$	433,831			3,078				$	65,426						4,508				$	103,697					396					$			40,291
Balance at March 31, 2023																								Balance at March 31, 2023		1,600				$	16			65,950				$	659			$	715,729			$	(324,840)					$	(14,013)						$	377,551		3,078		$	65,426			16,474		$	378,906			1,960			$	48,294		$	34,820

Purchase of common stock	Purchase of common stock	—	—		(156)	(1)		(760)		—		—								(761)			—				—					—			—					—				—				—			Purchase of common stock		—		—		(1)			—			(4)		—			—									(4)			—		—	—	—	—	—	—
Equity-based compensation	Equity-based compensation	—	—		—	—		1,799		—		—								1,799			—				—					—			—					—				—				1,592			Equity-based compensation		—		—		—			—			1,262		—			—									1,262			—		—	—	—	—	—	1,752

Issuance of restricted shares/units	Issuance of restricted shares/units	—	—		304	3		2		—		—								5			—				—					—			—					—				—				—			Issuance of restricted shares/units		—		—		45			—			—		—			—									—			—		—	—	—	—	—	—
Forfeiture of restricted common shares		—	—		(2)	—		—		—		—								—			—				—					—			—					—				—				—

Issuance of preferred stock	Issuance of preferred stock	—	—		—	—		—		—		—								—			—				—					4,375			98,277					673				16,296				—			Issuance of preferred stock		—		—		—			—			—		—			—									—			—		—	32	828	4	76	—

Dividends declared – common stock ($0.01/share)		—	—		—	—		—		(719)		—								(719)			—				—					—			—					—				—				—
Dividends declared – common stock ($0.05/share)																								Dividends declared – common stock ($0.05/share)		—				—				—				—				—				(3,335)						—							(3,335)			—		—			—		—				—			—			—
Dividends declared – preferred stock - Series B ($0.34/share)	Dividends declared – preferred stock - Series B ($0.34/share)	—	—		—	—		—		(1,059)		—								(1,059)			—				—					—			—					—				—				—			Dividends declared – preferred stock - Series B ($0.34/share)		—		—		—			—			—		(1,058)			—									(1,058)			—		—	—	—	—	—	—
Dividends declared – preferred stock - Series D ($0.52/share)	Dividends declared – preferred stock - Series D ($0.52/share)	—	—		—	—		—		(825)		—								(825)			—				—					—			—					—				—				—			Dividends declared – preferred stock - Series D ($0.52/share)		—		—		—			—			—		(825)			—									(825)			—		—	—	—	—	—	—
Dividends declared – preferred stock - Series E ($0.48/share)		—	—		—	—		—		(3,697)		—								(3,697)			—				—					—			—					—				—				—
Dividends declared – preferred stock - Series E ($0.50/share)																								Dividends declared – preferred stock - Series E ($0.50/share)		—				—				—				—				—				(7,986)						—							(7,986)			—		—			—		—				—			—			—
Dividends declared – preferred stock - Series M ($0.52/share)	Dividends declared – preferred stock - Series M ($0.52/share)	—	—		—	—		—		(447)		—								(447)			—				—					—			—					—				—				—			Dividends declared – preferred stock - Series M ($0.52/share)		—		—		—			—			—		(1,008)			—									(1,008)			—		—	—	—	—	—	—

Contributions from noncontrolling interests																								Contributions from noncontrolling interests		—				—				—				—				—				—						2,026							2,026			—		—			—		—				—			—			—
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—		—	—		—		—		—								—			—				—					—			—					—				—				(84)			Distributions to noncontrolling interests		—		—		—			—			—		—			(315)									(315)			—		—	—	—	—	—	(361)

Redemption/conversion of operating partnership units																								Redemption/conversion of operating partnership units		—				—				—				—				—				—						—							—			—		—			—		—				—			—			(123)
Net income (loss)	Net income (loss)	—	—		—	—		—		(8,040)		823								(7,217)			—				—					—			—					—				—				(1,166)			Net income (loss)		—		—		—			—			—		(1,846)			(367)									(2,213)			—		—	—	—	—	—	(925)

Redemptions of preferred stock		—	—		—	—		—		—		—								—			—				—					(3)			(84)					(2)				(59)				—
Redemption value adjustment - preferred stock		—	—		—	—		—		(2,649)		—								(2,649)			—				—					—			2,362					—				287				—
Redemption of preferred stock																								Redemption of preferred stock		—				—				—				—				—				—						—							—			—		—			(21)		(507)				(4)			(90)			—
Redemption value adjustment – preferred stock																								Redemption value adjustment – preferred stock		—				—				—				—				—				(301)						—							(301)			—		—			—		176				—			125			—
Redemption value adjustment	Redemption value adjustment	—	—		—	—		—		(2)		—								(2)			—				—					—			—					—				—				2			Redemption value adjustment		—		—		—			—			—		(11)			—									(11)			—		—	—	—	—	—	11
Balance at September 30, 2022		1,600	$	16	71,456	$	714	$	739,394	$	(307,745)	$	(14,120)							$	418,259		3,078				$	65,426				8,880			$	204,252				1,067				$	26,274			$	40,635
Balance at June 30, 2023																								Balance at June 30, 2023		1,600				$	16			65,994				$	659			$	716,987			$	(341,210)					$	(12,669)						$	363,783		3,078		$	65,426		16,485		$	379,403			1,960			$	48,405		$	35,174

8.25% Series D Cumulative Preferred Stock Common Stock Additional
Paid-in
Capital Accumulated Deficit Noncontrolling Interest in Consolidated Entities Total
5.50% Series B Cumulative Convertible
Preferred Stock
Series E Redeemable
Preferred Stock Series M Redeemable
Preferred Stock Redeemable Noncontrolling Interests in Operating Partnership
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
Balance at December 31, 2021 1,600 $ 16 65,365 $ 653 $ 707,418 $ (309,240) $ (16,549) $ 382,298 3,078 $ 65,426 1,710 $ 39,339 29 $ 715 $ 36,087
Impact of adoption of new accounting standard — — — — (6,257) 656 — (5,601) — — — — — — —
Purchase of common stock — — (249) (2) (1,306) — — (1,308) — — — — — — —
Equity-based compensation — — — — 4,583 — — 4,583 — — — — — — 4,358
Issuance of common stock — — 6,000 60 34,981 — — 35,041 — — — — — — —
Common stock issuance costs — — — — (27) — — (27) — — — — — — —
Issuance of preferred stock — — — — — — — — — — 7,175 160,762 1,040 25,101 —
Issuance of restricted shares/units — — 349 3 2 — — 5 — — — — — — —
Forfeiture of restricted common shares — — (9) — — — — — — — — — — — —
Dividends declared – common stock ($0.03/share) — — — — — (2,159) — (2,159) — — — — — — —
Dividends declared – preferred stock - Series B ($1.03/share) — — — — — (3,175) — (3,175) — — — — — — —
Dividends declared – preferred stock - Series D ($1.55/share) — — — — — (2,475) — (2,475) — — — — — — —
Dividends declared – preferred stock - Series E ($1.48/share) — — — — — (7,149) — (7,149) — — — — — — —
Dividends declared – preferred stock - Series M ($1.54/share) — — — — — (596) — (596) — — — — — — —
Contributions from noncontrolling interests — — — — — — 164 164 — — — — — — —
Distributions to noncontrolling interests — — — — — — — — — — — — — — (251)
Net income (loss) — — — — — 20,989 2,265 23,254 — — — — — — 647
Redemptions of preferred stock — — — — — — — — — — (5) (134) (2) (59) —
Redemption value adjustment - preferred stock — — — — — (4,802) — (4,802) — — — 4,285 — 517 —
Redemption value adjustment — — — — — 206 — 206 — — — — — — (206)
Balance at September 30, 2022 1,600 $ 16 71,456 $ 714 $ 739,394 $ (307,745) $ (14,120) $ 418,259 3,078 $ 65,426 8,880 $ 204,252 1,067 $ 26,274 $ 40,635


	8.25% Series D Cumulative Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest in Consolidated Entities			Total		5.50% Series B Cumulative Convertible Preferred Stock			Series E Redeemable Preferred Stock			Series M Redeemable Preferred Stock			Redeemable Noncontrolling Interests in Operating Partnership
	Shares	Amount		Shares	Amount								Shares			Amount	Shares		Amount	Shares		Amount
Balance at December 31, 2022	1,600	$	16	69,919	$	699	$	734,134	$	(324,740)	$	(16,346)		$	393,763	3,078	$	65,426	12,657	$	291,076	1,428	$	35,182	$	40,555

Purchase of common stock	—	—		(3,969)	(40)		(19,214)		—		—			(19,254)		—	—		—	—		—	—		—
Equity-based compensation	—	—		—	—		2,067		—		—			2,067		—	—		—	—		—	—		3,160


Issuance of preferred stock	—	—		—	—		—		—		—			—		—	—		3,860	86,744		537	12,955		—

Issuance of restricted shares/units	—	—		45	—		—		—		—			—		—	—		—	—		—	—		—

Forfeiture of restricted common shares	—	—		(1)	—		—		—		—			—		—	—		—	—		—	—		—
Dividends declared – common stock ($0.10 /share)	—	—		—	—		—		(6,669)		—			(6,669)		—	—		—	—		—	—		—
Dividends declared – preferred stock - Series B ($0.69/share)	—	—		—	—		—		(2,116)		—			(2,116)		—	—		—	—		—	—		—
Dividends declared – preferred stock - Series D ($1.03/share)	—	—		—	—		—		(1,650)		—			(1,650)		—	—		—	—		—	—		—
Dividends declared – preferred stock - Series E ($1.00/share)	—	—		—	—		—		(15,520)		—			(15,520)		—	—		—	—		—	—		—
Dividends declared – preferred stock - Series M ($1.03/share)	—	—		—	—		—		(1,941)		—			(1,941)		—	—		—	—		—	—		—
Contributions from noncontrolling interests	—	—		—	—		—		—		4,050			4,050		—	—		—	—		—	—		—
Distributions to noncontrolling interests	—	—		—	—		—		—		(315)			(315)		—	—		—	—		—	—		(722)
Redemption/conversion of operating partnership units	—	—		—	—		—		—		—			—		—	—		—	—		—	—		(7,162)
Net income (loss)	—	—		—	—		—		14,188		(58)			14,130		—	—		—	—		—	—		(664)
Redemption of preferred stock	—	—		—	—		—		—		—			—		—	—		(32)	(789)		(5)	(115)		—


Redemption value adjustment – preferred stock	—	—		—	—		—		(2,755)		—			(2,755)		—	—		—	2,372		—	383		—
Redemption value adjustment	—	—		—	—		—		(7)		—			(7)		—	—		—	—		—	—		7
Balance at June 30, 2023	1,600	$	16	65,994	$	659	$	716,987	$	(341,210)	$	(12,669)		$	363,783	3,078	$	65,426	16,485	$	379,403	1,960	$	48,405	$	35,174

~~Table of Contents~~


		8.25% Series D Cumulative Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest in Consolidated Entities								Total			5.50% Series B Cumulative Convertible Preferred Stock									Series E Redeemable Preferred Stock								Series M Redeemable Preferred Stock								Redeemable Noncontrolling Interests in Operating Partnership					8.25% Series D Cumulative Preferred Stock				Common Stock						Additional Paid-in Capital		Accumulated Deficit			Noncontrolling Interest in Consolidated Entities										Total			5.50% Series B Cumulative Convertible Preferred Stock			Series E Redeemable Preferred Stock		Series M Redeemable Preferred Stock		Redeemable Noncontrolling Interests in Operating Partnership
		Shares	Amount		Shares	Amount										Shares			Amount			Shares			Amount				Shares				Amount				Redeemable Noncontrolling Interests in Operating Partnership				Shares		Amount				Shares							Amount		Additional Paid-in Capital					Shares					Total							Shares			Amount					Shares		Amount	Redeemable Noncontrolling Interests in Operating Partnership
Balance at June 30, 2021		1,600	$	16	57,311	$	573			$	661,576			$	(295,641)		$	(16,264)							$	350,260			3,108				$	66,064						—				$	—					—					$			29,398
Balance at March 31, 2022																								Balance at March 31, 2022		1,600				$	16			71,270				$	712			$	736,911			$	(303,323)					$	(16,411)						$	417,905		3,078		$	65,426			3,191		$	73,404				62			$	1,538		$	42,291
Purchase of common stock																								Purchase of common stock		—				—				—				—				5				—						—							5			—		—			—		—					—			—			—
Equity-based compensation																								Equity-based compensation		—				—				—				—				1,464				—						—							1,464			—		—			—		—					—			—			1,832

Equity-based compensation		—	—		—	—		1,990		—		—								1,990			—				—					—			—					—				—				1,054
Issuance of common stock		—	—		6,550	66		34,166		—		—								34,232			—				—					—			—					—				—				—
Issuance of common units for hotel acquisitions		—	—		—	—		—		—		—								—			—				—					—			—					—				—				13,175
Common stock issuance costs																								Common stock issuance costs		—				—				—				—				(27)				—						—							(27)			—		—			—		—					—			—			—

Issuance of restricted shares/units																								Issuance of restricted shares/units		—				—				45				—				—				—						—							—			—		—			—		—					—			—			—
Forfeiture of restricted common shares	Forfeiture of restricted common shares	—	—		(7)	—		—		—		—								—			—				—					—			—					—				—				—			Forfeiture of restricted common shares		—		—		(5)			—			—		—			—										—			—		—	—	—	—	—	—
Issuance of preferred stock	Issuance of preferred stock	—	—		—	—		—		—		—								—			—				—					266			4,204					15				250				—			Issuance of preferred stock		—		—		—			—			—		—			—										—			—		—	1,319	29,392	334	8,003	—

Dividends declared – common stock ($0.01/share)																								Dividends declared – common stock ($0.01/share)		—				—				—				—				—				(720)						—							(720)			—		—			—		—			—		—			—			—
Dividends declared – preferred stock - Series B ($0.34/share)	Dividends declared – preferred stock - Series B ($0.34/share)	—	—		—	—		—		(1,058)		—								(1,058)			—				—					—			—					—				—				—			Dividends declared – preferred stock - Series B ($0.34/share)		—		—		—			—			—		(1,058)			—										(1,058)			—		—	—	—	—	—	—
Dividends declared – preferred stock-Series D ($0.52/share)	Dividends declared – preferred stock-Series D ($0.52/share)	—	—		—	—		—		(825)		—								(825)			—				—					—			—					—				—				—			Dividends declared – preferred stock-Series D ($0.52/share)		—		—		—			—			—		(825)			—										(825)			—		—	—	—	—	—	—
Dividends declared – preferred stock - Series E ($0.50 /share)	Dividends declared – preferred stock - Series E ($0.50 /share)	—	—		—	—		—		(90)		—								(90)			—				—					—			—					—				—				—			Dividends declared – preferred stock - Series E ($0.50 /share)		—		—		—			—			—		(2,053)			—										(2,053)			—		—	—	—	—	—	—
Dividends declared – preferred stock - Series M ($0.51 /share)	Dividends declared – preferred stock - Series M ($0.51 /share)	—	—		—	—		—		(4)		—								(4)			—				—					—			—					—				—				—			Dividends declared – preferred stock - Series M ($0.51 /share)		—		—		—			—			—		(128)			—										(128)			—		—	—	—	—	—	—

Distributions to noncontrolling interests																								Distributions to noncontrolling interests		—				—				—				—				—				—						—							—			—		—			—		—					—			—			(84)

Net income (loss)	Net income (loss)	—	—		—	—		—		(6,946)		(450)								(7,396)			—				—					—			—					—				—				(823)			Net income (loss)		—		—		—			—			—		14,366			1,468										15,834			—		—	—	—	—	—	846
Extinguishment of preferred stock		—	—		120	—		749		(111)		—								638			(30)				(638)					—			—					—				—				—
Redemption value adjustment - preferred stock		—	—		—	—		—		(2,017)		—								(2,017)			—				—					—			1,906					—				111				—

Redemption of preferred stock																								Redemption of preferred stock		—				—				—				—				—				—						—							—			—		—			(2)		(50)					—			—			—
Redemption value adjustment – preferred stock																								Redemption value adjustment – preferred stock		—				—				—				—				—				(1,160)						—							(1,160)			—		—			—		951					—			209			—

Redemption value adjustment	Redemption value adjustment	—	—		—	—		—		2,856		—								2,856			—				—					—			—					—				—				(2,856)			Redemption value adjustment		—		—		—			—			—		4,594			—										4,594			—		—	—	—	—	—	(4,594)
Balance at September 30, 2021		1,600	$	16	63,974	$	639	$	698,481	$	(303,836)	$	(16,714)							$	378,586		3,078				$	65,426				266			$	6,110				15				$	361			$	39,948
Balance at June 30, 2022																								Balance at June 30, 2022		1,600				$	16			71,310				$	712			$	738,353			$	(290,307)					$	(14,943)						$	433,831		3,078		$	65,426		4,508		$	103,697				396			$	9,750		$	40,291

8.25% Series D Cumulative Preferred Stock Common Stock Additional
Paid-in
Capital Accumulated Deficit Noncontrolling Interest in Consolidated Entities Total 5.50% Series B Cumulative Convertible Preferred Stock Series E Redeemable Preferred Stock Series M Redeemable Preferred Stock Redeemable Noncontrolling Interests in Operating Partnership
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
Balance at December 31, 2020 1,600 $ 16 38,275 $ 382 $ 541,870 $ (266,010) $ (15,088) $ 261,170 5,031 $ 106,949 — $ — — $ — $ 27,655
Purchase of common stock — — (50) — (348) — — (348) — — — — — — —
Equity-based compensation — — — — 5,015 — — 5,015 — — — — — — 2,250
Issuance of common stock — — 17,714 178 99,631 — — 99,809 — — — — — — —
Issuance of preferred stock — — — — — — — — — — 266 4,204 15 250 —
Issuance of restricted shares/units — — 764 8 (8) — — — — — — — — — —
Issuance of common units for hotel acquisitions — — — — — — — — — — — — — — 13,175
Forfeiture of restricted common shares — — (22) — — — — — — — — — — — —
Dividends declared – preferred stock - Series B ($1.03/share) — — — — — (3,689) — (3,689) — — — — — — —
Dividends declared – preferred stock-Series D ($1.55/share) — — — — — (2,475) — (2,475) — — — — — — —
Dividends declared – preferred stock - Series E ($0.50/share) — — — — — (90) — (90) — — — — — — —
Dividends declared – preferred stock - Series M ($$0.51/share) — — — — — (4) — (4) — — — — — — —
Contributions from noncontrolling interests — — — — — — 920 920 — — — — — — —
Redemption/conversion of operating partnership units — — 2 — 17 — — 17 — — — — — — (17)
Net income (loss) — — — — — (24,887) (2,546) (27,433) — — — — — — (3,184)
Extinguishment of preferred stock — — 7,291 71 46,047 (4,595) — 41,523 (1,953) (41,523) — — — —
Equity component of Convertible Senior Notes — — — — 6,257 — — 6,257 — — — — — — —
Redemption value adjustment - preferred stock — — — — — (2,017) — (2,017) — — — 1,906 — 111 —
Redemption value adjustment — — — — — (69) — (69) — — — — — — 69
Balance at September 30, 2021 1,600 $ 16 63,974 $ 639 $ 698,481 $ (303,836) $ (16,714) $ 378,586 3,078 $ 65,426 266 $ 6,110 15 $ 361 $ 39,948


	8.25% Series D Cumulative Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest in Consolidated Entities			Total		5.50% Series B Cumulative Convertible Preferred Stock			Series E Redeemable Preferred Stock			Series M Redeemable Preferred Stock			Redeemable Noncontrolling Interests in Operating Partnership
	Shares	Amount		Shares	Amount								Shares			Amount	Shares		Amount	Shares		Amount
Balance at December 31, 2021	1,600	$	16	65,365	$	653	$	707,418	$	(309,240)	$	(16,549)		$	382,298	3,078	$	65,426	1,710	$	39,339	29	$	715	$	36,087
Impact of adoption of new accounting standard	—	—		—	—		(6,257)		656		—			(5,601)		—	—		—	—		—	—		—
Purchase of common stock	—	—		(93)	(1)		(546)		—		—			(547)		—	—		—	—		—	—		—
Equity-based compensation	—	—		—	—		2,784		—		—			2,784		—	—		—	—		—	—		2,766
Issuance of common stock	—	—		6,000	60		34,981		—		—			35,041		—	—		—	—		—	—		—
Common stock issuance costs	—	—		—	—		(27)		—		—			(27)		—	—		—	—		—	—
Issuance of preferred stock	—	—		—	—		—		—		—			—		—	—		2,800	62,485		367	8,805		—
Issuance of restricted shares/units	—	—		45	—		—		—		—			—		—	—		—	—		—	—		—

Forfeiture of restricted common shares	—	—		(7)	—		—		—		—			—		—	—		—	—		—	—		—
Dividends declared – common stock - ($0.02/share)	—			—	—		—		(1,440)		—			(1,440)		—	—		—	—		—	—		—
Dividends declared – preferred stock - Series B ($0.69/share)	—	—		—	—		—		(2,116)		—			(2,116)		—	—		—	—		—	—		—
Dividends declared – preferred stock-Series D ($1.03/share)	—	—		—	—		—		(1,650)		—			(1,650)		—	—		—	—		—	—		—
Dividends declared – preferred stock - Series E ($1.00/share)	—	—		—	—		—		(3,452)		—			(3,452)		—	—		—	—		—	—		—
Dividends declared – preferred stock - Series M ($1.02/share)	—	—		—	—		—		(149)		—			(149)		—	—		—	—		—	—		—
Distributions to noncontrolling interests	—	—		—	—		—		—		—			—		—	—		—	—		—	—		(167)
Contributions from noncontrolling interests	—	—		—	—		—		—		164			164		—	—		—	—		—	—		1,813

Net income (loss)	—	—		—	—		—		29,029		1,442			30,471		—	—		—	—		—	—		—


Redemption of preferred stock	—	—		—	—		—		—		—			—		—	—		(2)	(50)		—	—		—
Redemption value adjustment – preferred stock	—	—		—	—		—		(2,153)		—			(2,153)		—	—		—	1,923		—	230		—
Redemption value adjustment	—	—		—	—		—		208		—			208		—	—		—	—		—	—		(208)
Balance at June 30, 2022	1,600	$	16	71,310	$	712	738,353		$	(290,307)	$	(14,943)		$	433,831	3,078	$	65,426	4,508	$	103,697	396	$	9,750	$	40,291

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


		Nine Months Ended September 30,				Six Months Ended June 30,
		2022		2021				2023		2022

CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES						CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	Net income (loss)	$	23,901	$	(30,617)		Net income (loss)	$	13,466	$	32,284
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:							Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	57,616		54,881			Depreciation and amortization	45,088		38,012
Equity-based compensation	Equity-based compensation	8,941		7,265			Equity-based compensation	5,227		5,550
Bad debt expense	Bad debt expense	727		208			Bad debt expense	327		560

(Gain) loss on extinguishment of debt							(Gain) loss on extinguishment of debt	(2,318)		—
Amortization of loan costs, discounts and capitalized default interest	Amortization of loan costs, discounts and capitalized default interest	(525)		(550)			Amortization of loan costs, discounts and capitalized default interest	868		(246)
Write-off of loan costs and exit fees	Write-off of loan costs and exit fees	106		1,960			Write-off of loan costs and exit fees	260		98
Amortization of intangibles	Amortization of intangibles	356		394			Amortization of intangibles	237		237
Amortization of non-refundable membership initiation fees	Amortization of non-refundable membership initiation fees	(1,150)		(715)			Amortization of non-refundable membership initiation fees	(839)		(710)
Interest expense accretion on refundable membership club deposits	Interest expense accretion on refundable membership club deposits	545		582			Interest expense accretion on refundable membership club deposits	342		368

(Gain) loss on insurance settlement and disposition of assets		—		(696)

Unrealized (gain) loss on derivatives		(4,019)		(64)

Realized and unrealized (gain) loss on derivatives							Realized and unrealized (gain) loss on derivatives	(695)		(1,616)

Equity in (earnings) loss of unconsolidated entity	Equity in (earnings) loss of unconsolidated entity	220		198			Equity in (earnings) loss of unconsolidated entity	148		146
Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	—		(174)			Deferred income tax expense (benefit)	127		—

Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions:	Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions:						Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions:
Accounts receivable and inventories	Accounts receivable and inventories	443		(4,079)			Accounts receivable and inventories	18,215		(5,069)

Prepaid expenses and other assets	Prepaid expenses and other assets	(5,745)		311			Prepaid expenses and other assets	(13,448)		(1,464)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	8,013		31,131			Accounts payable and accrued expenses	(9,664)		(202)
Operating lease right-of-use assets	Operating lease right-of-use assets	436		416			Operating lease right-of-use assets	295		296
Due to/from related parties, net	Due to/from related parties, net	673		(919)			Due to/from related parties, net	605		702

Due to/from third-party hotel managers	Due to/from third-party hotel managers	5,692		(7,365)			Due to/from third-party hotel managers	10,678		9,018

Due to/from Ashford Inc.	Due to/from Ashford Inc.	7,135		409			Due to/from Ashford Inc.	(7,464)		1,122
Operating lease liabilities	Operating lease liabilities	(215)		(184)			Operating lease liabilities	(154)		(147)
Other liabilities	Other liabilities	836		2,755			Other liabilities	662		898
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	103,986		55,147			Net cash provided by (used in) operating activities	61,963		79,837

CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES						CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from property insurance	Proceeds from property insurance	36		—			Proceeds from property insurance	327		36
Net proceeds from disposition of assets		—		1,816

Payments for initial franchise fee							Payments for initial franchise fee	(75)		—
Acquisition of hotel properties, net of cash and restricted cash acquired	Acquisition of hotel properties, net of cash and restricted cash acquired	(86,798)		(9,515)			Acquisition of hotel properties, net of cash and restricted cash acquired	—		(86,798)

Investment in unconsolidated entity	Investment in unconsolidated entity	(328)		(117)			Investment in unconsolidated entity	(158)		(164)

Improvements and additions to hotel properties	Improvements and additions to hotel properties	(36,528)		(15,849)			Improvements and additions to hotel properties	(36,199)		(19,910)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(123,618)		(23,665)			Net cash provided by (used in) investing activities	(36,105)		(106,836)

CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES						CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on indebtedness	Borrowings on indebtedness	70,500		83,231			Borrowings on indebtedness	—		70,500
Repayments of indebtedness	Repayments of indebtedness	(68,250)		(83,770)			Repayments of indebtedness	(196,355)		(68,000)
Payments of loan costs and exit fees	Payments of loan costs and exit fees	(1,847)		(1,895)			Payments of loan costs and exit fees	(790)		(1,728)
Payments for derivatives	Payments for derivatives	(2,092)		(200)			Payments for derivatives	(3,400)		(1,145)
Proceeds from derivatives							Proceeds from derivatives	4,010		—
Purchase of common stock	Purchase of common stock	(1,307)		(376)			Purchase of common stock	(19,306)		(547)

Payments for dividends and distributions	Payments for dividends and distributions	(12,981)		(6,882)			Payments for dividends and distributions	(26,139)		(7,334)
Proceeds from issuance of preferred stock		185,176		4,586
Proceeds from issuance of common stock		—		100,024
Net proceeds from issuance of preferred stock							Net proceeds from issuance of preferred stock	97,930		71,016

Common stock offering costs	Common stock offering costs	(102)		—			Common stock offering costs	—		(102)

Contributions from noncontrolling interest in consolidated entities	Contributions from noncontrolling interest in consolidated entities	164		920			Contributions from noncontrolling interest in consolidated entities	4,050		164

Redemption of operating partnership units							Redemption of operating partnership units	(7,162)		—
Distributions to noncontrolling interest in consolidated entities							Distributions to noncontrolling interest in consolidated entities	(2,024)		—

Redemption of preferred stock	Redemption of preferred stock	(193)		—			Redemption of preferred stock	(904)		(50)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	169,068		95,638			Net cash provided by (used in) financing activities	(150,090)		62,774
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	149,436		127,120			Net change in cash, cash equivalents and restricted cash	(124,232)		35,775
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	263,374		113,150			Cash, cash equivalents and restricted cash at beginning of period	315,696		263,374

Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	412,810	$	240,270		Cash, cash equivalents and restricted cash at end of period	$	191,464	$	299,149

~~Table of Contents~~


		Nine Months Ended September 30,				Six Months Ended June 30,
		2022		2021				2023		2022

SUPPLEMENTAL CASH FLOW INFORMATION	SUPPLEMENTAL CASH FLOW INFORMATION						SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	Interest paid	$	29,747	$	22,268		Interest paid	$	53,297	$	17,036
Income taxes paid (refunded)	Income taxes paid (refunded)	1,209		(20)			Income taxes paid (refunded)	2,920		(991)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES	SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES						SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Dividends and distributions declared but not paid	Dividends and distributions declared but not paid	$	4,353	$	2,112		Dividends and distributions declared but not paid	$	8,917	$	3,535

Common stock purchases accrued but not paid		1		—
Issuance of common units for hotel acquisition		—		13,175
Issuance of warrants in hotel acquisition		—		1,528

Assumption of debt in hotel acquisition	Assumption of debt in hotel acquisition	58,601		49,815			Assumption of debt in hotel acquisition	—		58,601
Capital expenditures accrued but not paid	Capital expenditures accrued but not paid	6,746		2,094			Capital expenditures accrued but not paid	21,011		5,363
Issuance of common stock for hotel acquisition	Issuance of common stock for hotel acquisition	35,040		—			Issuance of common stock for hotel acquisition	—		35,040

Accrued common stock offering expense		—		147

Accrued preferred stock offering expenses	Accrued preferred stock offering expenses	53		132			Accrued preferred stock offering expenses	—		105
Non-cash preferred stock dividends	Non-cash preferred stock dividends	639		—			Non-cash preferred stock dividends	1,747		278
Non-cash common stock dividends		5		—

Unsettled proceeds from derivatives							Unsettled proceeds from derivatives	470		—

SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH	SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH						SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	$	215,998	$	78,606		Cash and cash equivalents at beginning of period	$	261,541	$	215,998

Restricted cash at beginning of period	Restricted cash at beginning of period	47,376		34,544			Restricted cash at beginning of period	54,155		47,376

Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	$	263,374	$	113,150		Cash, cash equivalents and restricted cash at beginning of period	$	315,696	$	263,374

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	358,878	$	195,517		Cash and cash equivalents at end of period	$	128,025	$	251,032

Restricted cash at end of period	Restricted cash at end of period	53,932		44,753			Restricted cash at end of period	63,439		48,117

Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	412,810	$	240,270		Cash, cash equivalents and restricted cash at end of period	$	191,464	$	299,149

See Notes to Condensed Consolidated Financial Statements.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Braemar Hotels & Resorts Inc., together with its subsidiaries (“Braemar”), is a Maryland corporation 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. Braemar has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). Braemar conducts its business and owns substantially all of its assets through its operating partnership, Braemar Hospitality Limited Partnership (“Braemar OP”). Terms such as the “Company,” “we,” “us” or “our” ~~refers~~refer to Braemar Hotels & Resorts Inc. and, as the context may require, all entities included in its condensed consolidated financial statements.

We are advised by Ashford Hospitality Advisors LLC (“Ashford LLC” or the “Advisor”) through an advisory agreement. Ashford LLC is a subsidiary of Ashford Inc. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.

We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them for us under management contracts. Remington Lodging & Hospitality, LLC (“Remington ~~Hotels”~~Hospitality”), a subsidiary of Ashford Inc., manages four of our 1516 hotel properties. Third-party management companies manage the remaining hotel properties.

Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to, design and construction services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory and brokerage services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and mobile key technology.

The accompanying condensed consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of ~~September~~June 30, ~~2022,~~2023, own 1516 hotel properties in ~~six~~seven states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands (“USVI”). The portfolio includes 1314 wholly-owned hotel properties and two hotel properties that are owned through a partnership in which Braemar OP has a controlling interest. These hotel properties represent ~~3,971~~4,192 total rooms, or ~~3,736~~3,957 net rooms, excluding those attributable to our partner. As a REIT, Braemar is required to comply with limitations imposed by the Code related to operating hotels. As of ~~September~~June 30, ~~2022, 14~~2023, 15 of our 1516 hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Braemar TRS”). One hotel property, located in the USVI, is owned by our USVI TRS. Braemar TRS then engages third-party or affiliated hotel management companies to operate the hotel properties under management contracts. Hotel operating results related to the hotel properties are included in the condensed consolidated statements of operations.

As of ~~September~~June 30, ~~2022, 12~~2023, 13 of the 1516 hotel properties were leased by Braemar’s wholly-owned TRS, and the two hotel properties majority-owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership. Each leased hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues. Lease revenue from Braemar TRS is eliminated in consolidation. The hotel properties are operated under management contracts with Marriott Hotel Services, ~~Inc.~~LLC (“Marriott”), Hilton Management LLC (“Hilton”), Accor Management US Inc. (“Accor”), Four Seasons Hotels Limited (“Four Seasons”), Hyatt Corporation (“Hyatt”), The Ritz-Carlton Hotel Company, L.L.C. and its affiliates, each of which is also an affiliate of Marriott (“Ritz-Carlton”), and Remington ~~Hotels,~~Hospitality, which are eligible independent contractors under the Code.

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed consolidated financial statements include the accounts of Braemar Hotels & Resorts Inc., its majority-owned subsidiaries, and its majority-owned entities in which it has a controlling interest. All intercompany accounts and transactions between consolidated entities have been eliminated in these condensed consolidated financial statements. We have condensed

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our ~~2021~~2022 Annual Report on Form 10-K ~~as originally~~ filed with the Securities and Exchange Commission (“SEC”) on March 10, ~~2022.~~2023.

Braemar OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. All major decisions related to Braemar OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly-owned subsidiary, Braemar OP General Partner LLC, its general partner. As such, we consolidate Braemar OP.

The following items affect reporting comparability of our historical condensed consolidated financial statements:

•~~historical~~Historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022;~~2023;

•~~on August 5, 2021,~~On March 11, 2022, we acquired ~~the Mr. C Beverly Hills Hotel and five adjacent luxury residences.~~The Ritz-Carlton Reserve Dorado Beach hotel located in Dorado, Puerto Rico. The operating results of the hotel property have been included in the results of operations from its acquisition date; and

•~~on March 11,~~On December 1, 2022, we acquired ~~The Ritz-Carlton Reserve Dorado Beach hotel~~the Four Seasons Resort Scottsdale at Troon North located in ~~Dorado, Puerto Rico.~~Scottsdale, Arizona. The operating results of the hotel property have been included in the results of operations from its acquisition date.

Use of Estimates—The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Adopted Accounting Standards—In ~~August~~March 2020, the Financial Accounting Standards Board (“FASB”) issued ~~ASU 2020-06,~~Accounting Standards Update (“ASU”) 2020-04, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own EquityReference Rate Reform (Topic 848) (“ASU ~~2020-06”~~2020-04”), which ~~simplifies~~provides optional guidance through December 31, 2022 to ease the potential burden in accounting for, ~~certain~~or recognizing the effects of, reference rate reform on financial ~~instruments with characteristics of liabilities and equity. This ASU: (1) simplifies~~reporting. In January 2021, the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in Accounting Standards Codification (“ASC”) 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revisesFASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which further clarified the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, this ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities should adopt the guidance as of the ~~beginning~~reference rate reform optional practical expedients and exceptions outlined in Topic 848. The amendments in ASU Nos. 2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge effectiveness in hedging relationships that have been modified to replace a reference rate. In December 2022, the ~~fiscal year~~FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) (“ASU 2022-06”), which deferred the sunset date of ~~adoption and cannot adopt~~Topic 848 from December 31, 2022 to December 31, 2024. The Company applied the ~~guidance~~optional expedient in ~~an interim reporting period.~~

Weevaluating debt modifications converting from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”). The Company adopted ~~ASU 2020-06 through~~ the ~~modified retrospective method on January 1, 2022. Upon adoption, our Convertible Senior Notes are recorded~~standards upon the respective effective dates. There was no material impact as a single debt instrument at amortized cost, instead of being recorded as both a liability and equity. The Company ceased recording non-cash interest expense associated with amortization of the debt discount associated with the conversion features. The adoption of ASU 2020-06 resulted in an adjustment to additional paid-in capital, accumulated deficit, and the carrying value of our Convertible Senior Notes. The impact of adopting ASU 2020-06 includes an increase to “indebtedness, net” and a decrease to stockholders’ equity of approximately $5.6 million. The adoptionresult of this ~~standard did not have a material impact on our consolidated financial statements, beyond the impact to our Convertible Senior Notes described above.~~adoption.

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The impact of adoption on our condensed consolidated statement of operations for the three and nine months ended September 30, 2022 resulted in a decrease to net interest expense by $280,000 and $826,000, respectively, relating to the non-cash interest expense associated with amortization of the debt discount. The adoption had no effect on our basic and diluted net income per share of common stock attributable to common stockholders for the three and nine months ended September 30, 2022.

~~Recently Issued Accounting Standards—In March 2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848)~~ (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”) to provide guidance and relief for transitioning to alternative reference rates. ASU 2021-01 is effective immediately for all entities. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.

3. Revenue

The following tables present our revenue disaggregated by geographical areas (dollars in thousands):


		Three Months Ended September 30, 2022									Three Months Ended June 30, 2023
Primary Geographical Market	Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Total			Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Total
California	California	6	$	37,827	$	12,045	$	4,992	$	54,864		California	6	$	31,004	$	10,630	$	5,066	$	46,700
Puerto Rico	Puerto Rico	1	8,190		3,659		2,462		14,311			Puerto Rico	1	12,870		5,060		3,087		21,017
Arizona												Arizona	1	7,924		5,268		2,043		15,235
Colorado	Colorado	1	4,214		4,572		2,134		10,920			Colorado	1	1,866		1,811		1,689		5,366
Florida	Florida	2	13,480		5,723		5,368		24,571			Florida	2	15,290		8,630		5,665		29,585
Illinois	Illinois	1	8,165		2,371		493		11,029			Illinois	1	7,738		1,947		412		10,097
Pennsylvania	Pennsylvania	1	6,023		1,026		373		7,422			Pennsylvania	1	7,643		1,650		349		9,642
Washington	Washington	1	8,239		1,223		385		9,847			Washington	1	8,193		1,337		411		9,941
Washington, D.C.	Washington, D.C.	1	7,745		3,327		533		11,605			Washington, D.C.	1	11,433		5,721		426		17,580
USVI	USVI	1	10,620		3,678		2,322		16,620			USVI	1	13,176		5,722		2,646		21,544

Total	Total	15	$	104,503	$	37,624	$	19,062	$	161,189		Total	16	$	117,137	$	47,776	$	21,794	$	186,707


		Three Months Ended September 30, 2021									Three Months Ended June 30, 2022
Primary Geographical Market	Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Total			Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Total
California	California	6	$	28,838	$	8,024	$	3,626	$	40,488		California	6	$	34,313	$	11,560	$	4,226	$	50,099
Puerto Rico												Puerto Rico	1	11,927		4,700		2,908		19,535
Colorado	Colorado	1	4,123		4,152		2,168		10,443			Colorado	1	2,306		2,713		1,633		6,652
Florida	Florida	2	13,738		5,384		4,581		23,703			Florida	2	19,631		9,742		6,589		35,962
Illinois	Illinois	1	5,233		1,196		389		6,818			Illinois	1	7,542		2,209		411		10,162
Pennsylvania	Pennsylvania	1	3,911		580		243		4,734			Pennsylvania	1	6,158		1,120		309		7,587
Washington	Washington	1	6,906		792		550		8,248			Washington	1	5,587		887		316		6,790
Washington, D.C.	Washington, D.C.	1	2,476		512		337		3,325			Washington, D.C.	1	9,719		3,403		572		13,694
USVI	USVI	1	12,335		3,854		2,229		18,418			USVI	1	15,344		5,935		3,134		24,413

Total	Total	14	$	77,560	$	24,494	$	14,123	$	116,177		Total	15	$	112,527	$	42,269	$	20,098	$	174,894


	Six Months Ended June 30, 2023
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Total
California	6	$	65,570	$	21,940	$	10,756	$	98,266
Puerto Rico	1	28,300		9,935		6,224		44,459
Arizona	1	22,081		11,786		4,659		38,526
Colorado	1	16,207		8,172		4,672		29,051
Florida	2	36,939		19,129		12,336		68,404
Illinois	1	11,304		2,930		767		15,001
Pennsylvania	1	12,163		2,646		631		15,440
Washington	1	12,414		2,037		823		15,274
Washington, D.C.	1	20,210		11,209		859		32,278
USVI	1	29,476		10,220		5,613		45,309


Total	16	$	254,664	$	100,004	$	47,340	$	402,008


	Six Months Ended June 30, 2022
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Total
California	6	$	65,284	$	22,429	$	9,169	$	96,882
Puerto Rico	1	17,403		5,832		3,796		27,031
Colorado	1	14,483		8,846		4,764		28,093
Florida	2	44,714		19,264		13,632		77,610
Illinois	1	10,301		3,006		740		14,047
Pennsylvania	1	9,233		1,626		520		11,379
Washington	1	8,175		1,298		625		10,098
Washington, D.C.	1	13,600		5,733		992		20,325
USVI	1	34,526		10,942		5,841		51,309


Total	15	$	217,719	$	78,976	$	40,079	$	336,774

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Nine Months Ended September 30, 2022
Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total
California 6 $ 103,111 $ 34,474 $ 14,161 $ 151,746
Puerto Rico 1 25,593 9,491 6,258 41,342
Colorado 1 18,697 13,418 6,898 39,013
Florida 2 58,194 24,987 19,000 102,181
Illinois 1 18,466 5,377 1,233 25,076
Pennsylvania 1 15,256 2,652 893 18,801
Washington 1 16,414 2,521 1,010 19,945
Washington, D.C. 1 21,345 9,060 1,525 31,930
USVI 1 45,146 14,620 8,163 67,929
Total 15 $ 322,222 $ 116,600 $ 59,141 $ 497,963

Nine Months Ended September 30, 2021
Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total
California 6 $ 60,935 $ 17,942 $ 8,607 $ 87,484
Colorado 1 12,058 8,344 6,058 26,460
Florida 2 47,964 18,732 15,311 82,007
Illinois 1 9,607 2,020 792 12,419
Pennsylvania 1 7,568 706 490 8,764
Washington 1 10,980 1,041 1,046 13,067
Washington, D.C. 1 5,711 767 832 7,310
USVI 1 40,897 11,424 7,303 59,624
Total 14 $ 195,720 $ 60,976 $ 40,439 $ 297,135

4. Investments in Hotel Properties, net

Investments in hotel properties, net consisted of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Land	Land	$	560,241	$	480,530	Land	$	630,842	$	630,489
Buildings and improvements	Buildings and improvements	1,329,102		1,215,810		Buildings and improvements	1,520,184		1,511,949
Furniture, fixtures and equipment	Furniture, fixtures and equipment	132,386		123,954		Furniture, fixtures and equipment	157,626		147,019
Construction in progress	Construction in progress	21,298		12,038		Construction in progress	39,444		22,890
Residences	Residences	12,746		12,746		Residences	12,746		12,746
Total cost	Total cost	2,055,773		1,845,078		Total cost	2,360,842		2,325,093
Accumulated depreciation	Accumulated depreciation	(431,303)		(399,481)		Accumulated depreciation	(470,484)		(440,492)
Investments in hotel properties, net	Investments in hotel properties, net	$	1,624,470	$	1,445,597	Investments in hotel properties, net	$	1,890,358	$	1,884,601

Impairment Charges ~~and Insurance Recoveries~~

For the three and nine months ended September 30, 2021, we recognized a $0 and $481,000 gain, respectively, associated with proceeds received from an insurance claim. There was no such gain recognized for the three and nine months ended September 30, 2022.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, no impairment charges were recorded.

~~The Ritz-Carlton Reserve Dorado Beach~~

On March 11, 2022, the Company acquired a 100% interest in the 96-room Ritz-Carlton Reserve Dorado Beach in Dorado, Puerto Rico. The total consideration consisted of $104.0 million of cash and 6.0 million shares of the Company’s common stock with a fair value of approximately $35.0 million. Additionally, the Company assumed a $54.0 million mortgage loan with a fair value of approximately $58.6 million. See note 6 for further discussion regarding the mortgage loan. On March 14, 2022,

~~Table of Contents~~

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~the Company filed a resale registration statement on Form S-3, which was declared effective by the SEC on April 1, 2022, to register for resale the 6.0 million shares of common stock.~~

We accounted for this acquisition as an asset acquisition because substantially all of the fair value of the gross assets acquired were concentrated in a group of similar identifiable assets. The cost of the acquisition including transaction costs of approximately $1.9 million, was allocated to the individual assets acquired and liabilities assumed on a relative fair value basis, which is considered a Level 3 valuation technique.

~~The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in the acquisition (in thousands):~~


~~Land~~	$	~~79,711~~
~~Buildings and improvements~~	~~102,105~~
~~Furniture, fixtures and equipment~~	~~15,405~~
~~Investments in hotel properties~~	~~197,221~~
~~Restricted cash~~	~~1,091~~
~~Inventories~~	~~1,184~~
~~Mortgage loan~~	~~(58,601)~~
	$	~~140,895~~
~~Net other assets (liabilities)~~	$	~~(9,966)~~

The results of operations of the hotel property have been included in our results of operations from the acquisition date. The table below summarizes the total revenue and net income (loss) in our condensed consolidated statements of operations for the three and nine months ended September 30, 2022:

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Total revenue $ 14,311 $ 41,342
Net income (loss) 1,197 7,707

5. Investment in Unconsolidated Entity

OpenKey, Inc. (“OpenKey”), which is controlled and consolidated by Ashford Inc., is a hospitality-focused mobile key platform that provides a universal smart phone app and related hardware and software for keyless entry into hotel guest rooms. ~~In 2018,~~As of June 30, 2023, the Company has made ~~an initial investment~~equity investments in OpenKey ~~which is controlled and consolidated by Ashford Inc., for an initial 8.2% ownership interest.~~totaling $2.9 million. All investments were recommended by our Related Party Transactions Committee and unanimously approved by the independent members of our board of directors. ~~In 2022, the Company made additional investments in OpenKey of approximately $328,000. As of September 30, 2022, the Company has made investments in OpenKey totaling $2.9 million.~~

Our investment is recorded as “investment in unconsolidated entity” in our condensed consolidated balance sheets and is accounted for under the equity method of accounting as we have significant influence over the entity under the applicable accounting guidance. We review our investment in OpenKey for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of the investment. Any impairment is recorded in equity in earnings (loss) of unconsolidated entity. No such impairment was recorded for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

The following table summarizes our carrying value and ownership interest in OpenKey:


		September 30, 2022			December 31, 2021				June 30, 2023			December 31, 2022
Carrying value of the investment in OpenKey (in thousands)	Carrying value of the investment in OpenKey (in thousands)	$	1,797		$	1,689		Carrying value of the investment in OpenKey (in thousands)	$	1,535		$	1,689
Ownership interest in OpenKey	Ownership interest in OpenKey	7.9		%	7.8		%	Ownership interest in OpenKey	7.9		%	7.9		%

The following table summarizes our equity in earnings (loss) in OpenKey (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
Line Item	2023		2022		2023		2022
Equity in earnings (loss) of unconsolidated entity	$	(80)	$	(74)	$	(154)	$	(146)

On February 2, 2023, the Company entered into a loan funding agreement with Ashford Inc. and OpenKey. Per the agreement, Ashford Inc. and the Company will provide OpenKey with a maximum loan amount of $5.0 million to be allocated on a pro-rata basis based on current ownership interests and funded quarterly, over the course of 2023. The loan bears interest at an annual rate of 15%. Additionally, repayment of the loan principal and all accrued interest is due upon certain events. On June 9, 2023, the Company funded approximately $59,000. As of June 30, 2023, the Company has funded approximately $158,000.

The following table summarizes our note receivable from OpenKey (in thousands):


Line Item	June 30, 2023		December 31, 2022
Investment in unconsolidated entity	$	164	$	—

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~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes ~~our equity in earnings (loss) in~~the interest income associated with the loan to OpenKey (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,		Six Months Ended June 30,
Line Item	Line Item	2022		2021		2022		2021			Line Item	2023		2023
Equity in earnings (loss) of unconsolidated entity	Equity in earnings (loss) of unconsolidated entity	$	(74)	$	(68)	$	(220)	$	(198)		Equity in earnings (loss) of unconsolidated entity	$	5	$	6

6. Indebtedness, net

Indebtedness, netconsisted of the following (dollars in thousands):

Indebtedness

Collateral

Current Maturity

Final

Maturity (10)

Interest Rate

September 30, 2022

December 31, 2021

Indebtedness

Collateral

Current Maturity

Final

Maturity (11)

Interest Rate

June 30, 2023

December 31, 2022

Mortgage loan (3)

Park Hyatt Beaver Creek Resort & Spa

April 2022

LIBOR (1) +3.00%

—

67,500

Mortgage loan (3)

The Ritz-Carlton Sarasota

April 2023

LIBOR (1) + 2.65%

—

98,500

Mortgage loan (4)

Hotel Yountville

May 2023

LIBOR (1) + 2.55%

—

51,000

Mortgage loan

Bardessono Hotel and Spa

August 2023

SOFR (2) + 2.65%

40,000

Mortgage loan (5)

The Ritz-Carlton St. Thomas

August 2023

August 2024

LIBOR (1) + 3.95%

42,500

Mortgage loan (3)

The Ritz-Carlton Sarasota

October 2023

April 2024

SOFR (2) + 3.60%

98,000

—

Mortgage loan (4)

Hotel Yountville

November 2023

May 2024

SOFR (2) + 2.65%

51,000

—

Mortgage loan

The Ritz-Carlton Lake Tahoe

January 2024

SOFR (2) + 2.20%

54,000

Mortgage loan

Capital Hilton

February 2024

LIBOR (1) + 1.70%

195,000

Hilton La Jolla Torrey Pines

Mortgage loan (4)

The Ritz-Carlton Sarasota

April 2023

LIBOR (1) + 2.65%

98,750

99,500

Mortgage loan (4)

Hotel Yountville

May 2023

LIBOR (1) + 2.55%

51,000

Mortgage loan (5)

The Notary Hotel

June 2023

June 2025

LIBOR (1) + 2.16%

435,000

Mortgage loan ~~(4)~~(6)

Park Hyatt Beaver Creek Resort & Spa

February 2024

February 2027

SOFR (2) + 2.86%

70,500

Mortgage loan(7)

The Ritz-Carlton Reserve Dorado Beach

March 2024

March 2026

LIBOR (1) + 6.00%

—

54,000

Mortgage loan (8)

The Notary Hotel

June 2024

June 2025

LIBOR (1) + 2.61%

293,180

435,000

The Clancy

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

Mortgage loan (4)

Bardessono Hotel and Spa

August 2023

LIBOR (1) + 2.55%

40,000

Mortgage loan (6)

The Ritz-Carlton St. Thomas

August 2023

August 2024

LIBOR (1) + 3.95%

42,500

Mortgage loan ~~(4)~~(6)

The Ritz-Carlton Lake Tahoe

January 2024

LIBOR (1) + 2.10%

54,000

Mortgage loan(7)

Capital Hilton

February 2024

LIBOR (1) + 1.70%

195,000

Hilton La Jolla Torrey Pines

Mortgage loan (3)

Park Hyatt Beaver Creek Resort & Spa

February 2024

February 2027

SOFR (2) + 2.86%

70,500

—

Mortgage loan (7)

The Ritz-Carlton Reserve Dorado Beach

March 2024

March 2026

LIBOR (1) + 6.00%

54,000

—

Mortgage loan (8)

Mr. C Beverly Hills Hotel

August 2024

LIBOR (1) + 3.60%

30,000

Mortgage loan (4) (9)

Pier House Resort & Spa

September 2024

LIBOR (1) + 1.85%

—

80,000

Mortgage loan (9)

Pier House Resort & Spa

September 2024

SOFR (2) + 1.95%

80,000

—

Mortgage loan (9)

Mr. C Beverly Hills Hotel

August 2024

LIBOR (1) + 3.60%

30,000

Mortgage loan

Pier House Resort & Spa

September 2024

SOFR (2) + 1.95%

80,000

Mortgage loan (10)

Four Seasons Resort Scottsdale

December 2025

December 2027

SOFR (2) + 3.75%

100,000

Convertible Senior Notes

Equity

June 2026

4.50%

86,250

Convertible Senior Notes

Equity

June 2026

4.50%

86,250

1,237,000

1,180,750

1,140,430

1,336,750

Capitalized default interest and late charges, net

2,400

3,904

Capitalized default interest and late charges, net

1,046

1,934

Deferred loan costs, net

(3,455)

(3,538)

Deferred loan costs, net

(3,616)

(5,054)

Premiums/(Discounts), net

919

(8,438)

Premiums/(discounts), net

(1,902)

500

Indebtedness, net

1,236,864

1,172,678

Indebtedness, net

1,135,958

1,334,130

__________________

(1)LIBOR rates were ~~3.143%~~5.22% and ~~0.101%~~4.39% at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(2)SOFR ~~rate was 3.042%~~rates were 5.14% and 4.36% at ~~September~~June 30, ~~2022.~~2023 and December 31, 2022, respectively.

(3)On ~~February 2, 2022,~~April 4, 2023, we ~~refinanced~~amended this mortgage ~~loan totaling $67.5 million with a new $70.5 million mortgage loan with a two-year initial term and three one-year extension options, subject to~~loan. Terms of the ~~satisfaction of certain conditions. The new mortgage loan is~~amendment replaced the variable interest ~~only and bears interest at a~~ rate of LIBOR + 2.65% with SOFR + ~~2.86%.~~

~~(4)This mortgage loan has a LIBOR floor of 0.25%.~~

~~(5)This mortgage loan has five one-year~~2.75%, extended the current maturity date to October 2023, and added one six-month extension ~~options,~~option, subject to satisfaction of certain ~~conditions, of which~~conditions. Effective June 1, 2023, the ~~third was exercised~~variable interest rate increased from SOFR + 2.75% to SOFR + 3.60% in ~~June 2022.~~accordance with the loan agreement.

~~(6)~~(4)On April 18, 2023, we amended this mortgage loan. Terms of the amendment replaced the variable interest rate of LIBOR + 2.55% with SOFR + 2.65%, extended the current maturity date to November 2023, and added one six-month extension option, subject to satisfaction of certain conditions.

(5)This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in August 2022. This mortgage loan has a LIBOR floor of 1.00%.

~~(7)~~(6)This mortgage loan has ~~two~~three one-year extension options, subject to satisfaction of certain conditions.

(7)On January 18, 2023, we repaid this mortgage loan.

(8)This mortgage loan has afive one-year extension options, subject to satisfaction of certain conditions, of which the fourth was exercised in June 2023. In accordance with exercising the fourth one-year extension option, we repaid $142.0 million of principal and the variable interest rate increased from LIBOR ~~floor of 0.75%~~+ 2.16% to LIBOR + 2.61%.

~~(8)~~(9)This mortgage loan has a LIBOR floor of 1.50%.

~~(9)~~(10)~~On September 29, 2022, we amended this~~This mortgage ~~loan. Terms~~loan has a SOFR floor of ~~the agreement replaced the variable interest rate of LIBOR + 1.85% with SOFR + 1.95%~~1.00%.

~~(10)~~(11)The final maturity date assumes all available ~~extensions~~extension options will be exercised.

During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront, Capital Hilton and Hilton La Jolla Torrey Pines.certain of our hotels. The Company determined that all of the forbearance and other agreements evaluated

1413

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

~~evaluated~~ were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges.

As a result of the troubled debt restructurings, all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method. The amount of principal ~~amortization~~that was amortized was approximately $420,000 and $888,000, respectively, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022 was $481,000 and $1.5 million, respectively.~~2023. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the amount of principal amortization was ~~approximately $519,000~~$500,000 and ~~$2.9~~$1.0 million, respectively.

On ~~March 11, 2022, in connection with~~January 18, 2023, the ~~acquisition of~~Company repaid its $54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach, which resulted in a gain on extinguishment of debt of $2.3 million for the ~~Company assumed a $54 million~~six months ended June 30, 2023. The gain was primarily attributable to the premium that was recorded upon the assumption of the mortgage ~~loan. See note 4.~~loan when the hotel was acquired.

Convertible Senior Notes

In May 2021, the Company issued $86.25 million aggregate principal amount of 4.50% Convertible Senior Notes due June 2026 (the “Convertible Senior Notes”). The net proceeds from this offering of the Convertible Senior Notes were approximately $82.8 million after deducting the underwriting fees and other expenses paid by the Company.

The Convertible Senior Notes are governed by an indenture between the Company and U.S. Bank National Association, as trustee. The Convertible Senior Notes bear interest at a rate of 4.50% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The Convertible Senior Notes will mature on June 1, 2026. ~~The~~For the three and six months ended June 30, 2023, the Company recorded coupon interest expense of $970,000 and ~~$2.9~~$1.9 million, ~~for~~respectively. For the three and ~~nine~~six months ended ~~September~~June 30, 2022, ~~respectively. The~~the Company ~~also~~ recorded coupon interest expense of $970,000 and ~~$1.4~~$1.9 million, ~~for~~respectively.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively.~~

~~Upon issuance of~~2023, the Convertible Senior Notes, the Company separated the Convertible Senior Notes into liability and equity components. The initial carrying amount of the liability component was calculated using a discount rate of 7.1%. The discount rate was based on the terms of debt instruments that were similar to the Convertible Senior Notes. The $6.3 million carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the net proceeds of the Convertible Senior Notes. The amount recorded in equity was not subject to remeasurement or amortization. The initial discount of $9.3 million was accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Senior Notes. The Company recorded discount amortization of ~~$140,000~~$146,000 and ~~$411,000~~$290,000, respectively, related to the initial purchase discount, ~~for the three and nine months ended September 30, 2022,~~ with the remaining discount balance to be amortized through June 2026. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the discount amortization was ~~$391,000~~$139,000 and ~~$576,000,~~$271,000, respectively.

As a result of the Company's adoption of ASU 2020-06 on January 1, 2022, the Convertible Senior Notes are now recorded as a single liability with no portion recorded in equity. The Company also ceased recording non-cash interest expense associated with the amortization of the portion of the debt discount originally reflected in equity, while the initial purchase discount remains and will continue to be amortized through June 2026.

The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances. In addition, following the occurrence of certain corporate events, if the Company provides notice of redemption or if it exercises its option to convert the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be.

The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.

~~Table of Contents~~

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

Effective June 30, 2023, LIBOR is no longer published. Accordingly all variable interest rate mortgage loans held by the Company that used the LIBOR index transitioned to SOFR beginning on July 1, 2023. Not all lenders will execute loan amendment documents and instead will defer to original loan documents that dictate changes in index rates.

If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. As of ~~September~~June 30, ~~2022,~~2023, we were in compliance with all covenants.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

7. Derivative Instruments

Interest Rate Derivatives—We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage these risks, we primarily use interest rate derivatives to hedge our debt and our cash flows, which include interest rate caps. All derivatives are recorded at fair value. Payments from counterparties on in-the-money interest rate caps are recognized as realized gains on our consolidated statements of operations.

The following table summarizes the interest rate derivatives we entered into over the applicable periods:


		Nine Months Ended September 30,						Six Months Ended June 30,
Interest rate caps:(1)	Interest rate caps:(1)	2022			2021				Interest rate caps:(1)	2023			2022
Notional amount (in thousands)	Notional amount (in thousands)	$	676,500		$	882,500			Notional amount (in thousands)	$	496,180		$	556,500
Strike rate low end of range	Strike rate low end of range	3.50		%	0.75		%		Strike rate low end of range	3.50		%	3.50		%
Strike rate high end of range	Strike rate high end of range	4.00		%	4.00		%		Strike rate high end of range	5.25		%	4.00		%
Effective date range	Effective date range	February 2022 - September 2022			January 2021 - September 2021				Effective date range	January 2023 - June 2023			February 2022-May 2022
Termination date range	Termination date range	May 2023 - February 2024			February 2022 - August 2024				Termination date range	October 2023 - June 2024			May 2023- February 2024
Total cost of interest rate caps (in thousands)	Total cost of interest rate caps (in thousands)	$	2,092		$	200			Total cost of interest rate caps (in thousands)	$	3,400		$	1,145

_______________

(1) No instruments were designated as cash flow hedges.

Interest rate derivatives consisted of the following:


Interest rate caps: (1)	Interest rate caps: (1)	September 30, 2022			December 31, 2021			Interest rate caps: (1)	June 30, 2023			December 31, 2022
Notional amount (in thousands)	Notional amount (in thousands)	$	940,500		$	882,500		Notional amount (in thousands)	$	816,680		$	960,500
Strike rate low end of range	Strike rate low end of range	2.00		%	0.75		%	Strike rate low end of range	2.00		%	2.00		%
Strike rate high end of range	Strike rate high end of range	4.00		%	4.00		%	Strike rate high end of range	5.25		%	4.50		%

Termination date range	Termination date range	October 2022 - August 2024			February 2022 - August 2024			Termination date range	August 2023 - January 2025			January 2023- January 2025
Aggregate principal balance on corresponding mortgage loans (in thousands)	Aggregate principal balance on corresponding mortgage loans (in thousands)	$	859,250		$	857,000		Aggregate principal balance on corresponding mortgage loans (in thousands)	$	816,680		$	959,000

_______________

(1)No instruments were designated as cash flow hedges.

Warrants—On August 5, 2021, as part of the consideration paid to acquire the Mr. C Beverly Hills Hotel and five adjacent luxury residences, the Company issued 500,000 warrants for the purchase of Braemar common stock with a $6.00 strike price on or after August 5, 2021 until August 5, 2024. The holder can choose to exercise the ~~warrant~~warrants by cash or by net issue exercise, in which event the Company shall issue to the holder a number of warrant shares which reflect the fair market value of the Company’s common stock. As of ~~September~~June 30, ~~2022,~~2023, no warrants have been exercised.

The initial fair value of the ~~warrant~~warrants was calculated using a Black-Scholes option pricing model with the following assumptions: three-year contractual term; 97.93% volatility; 0% dividend rate; and a risk-free interest rate of 0.38%. The estimated fair value of the warrants was approximately $1.5 million on the date of issuance. The warrants are re-valued at each reporting period with the change in fair value recorded through earnings.

In applying the guidance in ASC 815, it was determined that the warrants should be classified as a liability as a result of certain settlement provisions. The warrants are included in derivative liabilities on the condensed consolidated balance ~~sheet~~sheets and changes in value are reported as a component of “realized and unrealized gain (loss) on ~~derivatives~~derivatives” on the condensed consolidated statements of operations. This is a Level 2 valuation technique.

~~Table of Contents~~

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

8. Fair Value Measurements

Fair Value Hierarchy—Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the ~~market place~~marketplace as discussed below:

•Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

The fair value of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates ~~rise~~rose above the strike rates of the caps. Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves ~~(LIBOR~~(SOFR forward curves) and volatilities (Level 2 inputs). We also incorporate credit valuation adjustments (Level 3 inputs) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.

When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at ~~September~~June 30, ~~2022,~~2023, the ~~LIBOR~~SOFR interest rate forward curve (Level 2 inputs) assumed ~~an uptrend~~a downtrend from ~~3.143%~~5.141% to ~~4.595%~~3.686% for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):


		Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total				Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2022
June 30, 2023											June 30, 2023
Assets	Assets										Assets
Derivative assets:	Derivative assets:										Derivative assets:

Interest rate derivatives - caps	Interest rate derivatives - caps	$	—	$	5,255	$	—	$	5,255		Interest rate derivatives - caps	$	—	$	6,308	$	—	$	6,308

Total	Total	$	—	$	5,255	$	—	$	5,255	(1)	Total	$	—	$	6,308	$	—	$	6,308	(1)

Liabilities	Liabilities										Liabilities
Derivative liabilities:	Derivative liabilities:										Derivative liabilities:
Warrants	Warrants	—		(440)		—		(440)		(2)	Warrants	$	—	$	(165)	$	—	$	(165)	(2)

Net	Net	$	—	$	4,815	$	—	$	4,815		Net	$	—	$	6,143	$	—	$	6,143

~~Table of Contents~~

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~


		Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total				Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
December 31, 2021
December 31, 2022											December 31, 2022
Assets	Assets										Assets
Derivative assets:	Derivative assets:										Derivative assets:

Interest rate derivatives - caps	Interest rate derivatives - caps	$	—	$	139	$	—	$	139		Interest rate derivatives - caps	$	—	$	6,482	$	—	$	6,482

		$	—	$	139	$	—	$	139	(1)		$	—	$	6,482	$	—	$	6,482	(1)
Liabilities	Liabilities										Liabilities
Derivative liabilities:	Derivative liabilities:										Derivative liabilities:
Warrants	Warrants	—		(1,435)		—		(1,435)		(2)	Warrants	$	—	$	(284)	$	—	$	(284)	(2)
Net	Net	$	—	$	(1,296)	$	—	$	(1,296)		Net	$	—	$	6,198	$	—	$	6,198

__________________

(1)Reported as “derivative assets” in our condensed consolidated balance sheets.

(2)Reported as “derivative liabilities” in our condensed consolidated balance sheets.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Effect of Fair Value Measured Assets and Liabilities on Condensed Consolidated Statements of Operations

The following table summarizes the effect of fair value measured assets and liabilities on our condensed consolidated statements of operations (in thousands):


		Gain (Loss) Recognized in Income											Gain (Loss) Recognized in Income
		Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
		2022			2021		2022			2021			2023			2022			2023			2022
Assets	Assets											Assets
Derivative assets:	Derivative assets:											Derivative assets:

Interest rate derivatives - caps	Interest rate derivatives - caps	$	2,138	(1)	$	(48)	$	3,024	(1)	$	(126)	Interest rate derivatives - caps	$	1,013		$	43		$	576		$	886

Total derivative assets		$	2,138		$	(48)	$	3,024		$	(126)

Total	Total	$	2,138		$	(48)	$	3,024		$	(126)	Total	$	1,013		$	43		$	576		$	886
Liabilities	Liabilities											Liabilities
Derivative liabilities:	Derivative liabilities:											Derivative liabilities:
Warrants	Warrants	$	265		$	190	$	995		$	190	Warrants	$	16		$	1,165		$	119		$	730

Net	Net	$	2,403		$	142	$	4,019		$	64	Net	$	1,029		$	1,208		$	695		$	1,616

Total combined	Total combined											Total combined

Interest rate derivatives - caps	Interest rate derivatives - caps	$	2,138		$	(48)	$	3,024		$	(126)	Interest rate derivatives - caps	$	(1,269)		$	43		$	(3,573)		$	886

Warrants	Warrants	265			190		995			190		Warrants	16			1,165			119			730

Unrealized gain (loss) on derivatives	Unrealized gain (loss) on derivatives	$	2,403		$	142	$	4,019		$	64	Unrealized gain (loss) on derivatives	$	(1,253)	(1)	$	1,208	(1)	$	(3,454)	(1)	$	1,616	(1)
Realized gain (loss) on interest rate caps												Realized gain (loss) on interest rate caps	2,282		(1) (2)	—			4,149		(1) (2)	—

Net	Net	$	2,403		$	142	$	4,019		$	64	Net	$	1,029		$	1,208		$	695		$	1,616

________

(1)~~Excludes income~~Reported in “realized and unrealized gain (loss) on derivatives” in our consolidated statements of ~~$27,000 for both the three~~operations.

(2)Represents settled and ~~nine months ended September 30, 2022, associated with~~unsettled payments ~~received~~ from counterparties on interest rate ~~caps, which is included in “other income (expense)” in our condensed consolidated statements of operations.~~caps.

9. Summary of Fair Value of Financial Instruments

Determining the estimated fair values of certain financial instruments such as indebtedness requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled.

The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):


	June 30, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:


Derivative assets	$	6,308	$	6,308	$	6,482	$	6,482
Financial liabilities measured at fair value:
Derivative liabilities	$	165	$	165	$	284	$	284
Financial assets not measured at fair value:
Cash and cash equivalents	$	128,025	$	128,025	$	261,541	$	261,541
Restricted cash	63,439		63,439		54,155		54,155
Accounts receivable, net	32,864		32,864		51,448		51,448




Due from related parties, net	333		333		938		938
Due from third-party hotel managers	15,430		15,430		26,625		26,625
Financial liabilities not measured at fair value:
Indebtedness	$	1,138,528	$1,050,061 to $1,160,595		$	1,337,250	$1,229,671 to $1,359,110
Accounts payable and accrued expenses	135,096		135,096		133,978		133,978
Dividends and distributions payable	8,917		8,917		8,184		8,184

Due to Ashford Inc.	4,558		4,558		10,005		10,005

Due to third-party hotel managers	1,579		1,579		2,096		2,096

~~Table of Contents~~

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

~~The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):~~

September 30, 2022 December 31, 2021
Carrying
Value Estimated
Fair Value Carrying
Value Estimated
Fair Value
Financial assets measured at fair value:
Derivative assets $ 5,255 $ 5,255 $ 139 $ 139
Financial liabilities measured at fair value:
Derivative liabilities $ 440 $ 440 $ 1,435 $ 1,435
Financial assets not measured at fair value:
Cash and cash equivalents $ 358,878 $ 358,878 $ 215,998 $ 215,998
Restricted cash 53,932 53,932 47,376 47,376
Accounts receivable, net 27,158 27,158 23,701 23,701
Due from related parties, net 1,097 1,097 1,770 1,770
Due from third-party hotel managers 22,941 22,941 27,461 27,461
Financial liabilities not measured at fair value:
Indebtedness $ 1,237,919 $1,126,573 to $1,245,156 $ 1,172,312 $1,022,408 to $1,130,029
Accounts payable and accrued expenses 122,150 122,150 96,316 96,316
Dividends and distributions payable 4,353 4,353 2,173 2,173
Due to Ashford Inc. 8,891 8,891 1,474 1,474
Due to third-party hotel managers 1,514 1,514 610 610

Cash, cash equivalents and restricted cash. These financial assets have maturities of less than 90 days and most bear interest at market rates. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.

Accounts receivable, net, due from related parties, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc. and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

Derivative assets and derivative liabilities. See notes 7 and 8 for a complete description of the methodology and assumptions utilized in determining fair values.

Indebtedness, net. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. We estimated the fair value of the total indebtedness to be approximately ~~91.0%~~92.2% to ~~100.6%~~101.9% of the carrying value of ~~$1.2~~$1.1 billion at ~~September~~June 30, ~~2022,~~2023, and approximately ~~87.2%~~92.0% to ~~96.4%~~101.6% of the carrying value of ~~$1.2~~$1.3 billion at December 31, ~~2021.~~2022. These fair value estimates are considered a Level 2 valuation technique.

10. Income (Loss) Per Share

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			Three Months Ended June 30,				Six Months Ended June 30,
		(restated)				(restated)					2023		2022		2023		2022
Net income (loss) attributable to common stockholders - basic and diluted:	Net income (loss) attributable to common stockholders - basic and diluted:									Net income (loss) attributable to common stockholders - basic and diluted:
Net income (loss) attributable to the Company	Net income (loss) attributable to the Company	$	(8,040)	$	(6,946)	$	20,989	$	(24,887)	Net income (loss) attributable to the Company	$	(1,846)	$	14,366	$	14,188	$	29,029
Less: Dividends on preferred stock		(6,028)		(1,977)		(13,395)		(6,258)
Less: Deemed dividends on redeemable preferred stock		(2,649)		—		(4,802)		—
Less: Dividends on common stock		(710)		—		(2,124)		—
Less: Loss on extinguishment of preferred stock - Series B		—		(111)		—		(4,595)
Less: Dividends on unvested performance stock units		(5)		—		(19)		—
Less: dividends on preferred stock										Less: dividends on preferred stock	(10,877)		(4,064)		(21,227)		(7,367)
Less: deemed dividends on preferred stock										Less: deemed dividends on preferred stock	(301)		—		(2,755)		—
Less: dividends on common stock										Less: dividends on common stock	(3,291)		(707)		(6,580)		(1,414)

Less: Dividends on unvested restricted shares		(4)		—		(16)		—
Less: Net (income) loss allocated to performance stock units		—		—		(43)		—
Less: Net (income) loss allocated to unvested restricted shares		—		—		(49)		—
Less: dividends on unvested performance stock units										Less: dividends on unvested performance stock units	(36)		(7)		(72)		(14)

Less: dividends on unvested restricted shares										Less: dividends on unvested restricted shares	(8)		(6)		(17)		(12)
Less: net (income) loss allocated to performance stock units										Less: net (income) loss allocated to performance stock units	—		(95)		—		(207)
Less: net (income) loss allocated to unvested restricted shares										Less: net (income) loss allocated to unvested restricted shares	—		(74)		—		(161)
Undistributed net income (loss) allocated to common stockholders	Undistributed net income (loss) allocated to common stockholders	$	(17,436)	$	(9,034)	$	541	$	(35,740)	Undistributed net income (loss) allocated to common stockholders	(16,359)		9,413		(16,463)		19,854
Add back: Dividends on common stock		710		—		2,124		—
Distributed and undistributed net income (loss) - basic and diluted		$	(16,726)	$	(9,034)	$	2,665	$	(35,740)
Add back: dividends on common stock										Add back: dividends on common stock	3,291		707		6,580		1,414
Distributed and undistributed net income (loss) - basic										Distributed and undistributed net income (loss) - basic	$	(13,068)	$	10,120	$	(9,883)	$	21,268
Interest expense on Convertible Senior Notes										Interest expense on Convertible Senior Notes	—		1,108		—		2,211

Dividends on preferred stock - Series E (inclusive of deemed dividends)										Dividends on preferred stock - Series E (inclusive of deemed dividends)	—		2,053		—		3,452
Dividends on preferred stock - Series M (inclusive of deemed dividends)										Dividends on preferred stock - Series M (inclusive of deemed dividends)	—		128		—		149
Distributed and undistributed net income (loss) - diluted										Distributed and undistributed net income (loss) - diluted	$	(13,068)	$	13,409	$	(9,883)	$	27,080

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	Weighted average common shares outstanding – basic	70,956		59,207		69,213		48,954		Weighted average common shares outstanding – basic	65,806		70,740		68,378		68,325
Effect of assumed exercise of warrants	Effect of assumed exercise of warrants	—		—		1		—		Effect of assumed exercise of warrants	—		—		—		1

Effect of assumed conversion of Convertible Senior Notes										Effect of assumed conversion of Convertible Senior Notes	—		13,610		—		13,610
Effect of assumed conversion of preferred stock - Series E										Effect of assumed conversion of preferred stock - Series E	—		22,207		—		16,232
Effect of assumed conversion of preferred stock - Series M										Effect of assumed conversion of preferred stock - Series M	—		1,112		—		630
Weighted average common shares outstanding – diluted	Weighted average common shares outstanding – diluted	70,956		59,207		69,214		48,954		Weighted average common shares outstanding – diluted	65,806		107,669		68,378		98,798

Income (loss) per share - basic:	Income (loss) per share - basic:									Income (loss) per share - basic:

Net income (loss) allocated to common stockholders per share	Net income (loss) allocated to common stockholders per share	$	(0.24)	$	(0.15)	$	0.04	$	(0.73)	Net income (loss) allocated to common stockholders per share	$	(0.20)	$	0.14	$	(0.14)	$	0.31
Income (loss) per share - diluted:	Income (loss) per share - diluted:									Income (loss) per share - diluted:

Net income (loss) allocated to common stockholders per share	Net income (loss) allocated to common stockholders per share	$	(0.24)	$	(0.15)	$	0.04	$	(0.73)	Net income (loss) allocated to common stockholders per share	$	(0.20)	$	0.12	$	(0.14)	$	0.27

2018

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			Three Months Ended June 30,				Six Months Ended June 30,
		(restated)				(restated)					2023		2022		2023		2022
Net income (loss) allocated to common stockholders is not adjusted for:	Net income (loss) allocated to common stockholders is not adjusted for:									Net income (loss) allocated to common stockholders is not adjusted for:
Income (loss) allocated to unvested restricted shares	Income (loss) allocated to unvested restricted shares	$	4	$	—	$	65	$	—	Income (loss) allocated to unvested restricted shares	$	8	$	80	$	17	$	173
Income (loss) allocated to unvested performance stock units	Income (loss) allocated to unvested performance stock units	5		—		62		—		Income (loss) allocated to unvested performance stock units	36		102		72		221
Income (loss) attributable to redeemable noncontrolling interests in operating partnership	Income (loss) attributable to redeemable noncontrolling interests in operating partnership	(1,166)		(823)		647		(3,184)		Income (loss) attributable to redeemable noncontrolling interests in operating partnership	(925)		846		(664)		1,813
Dividends on preferred stock - Series B	Dividends on preferred stock - Series B	1,059		1,058		3,175		3,689		Dividends on preferred stock - Series B	1,058		1,058		2,116		2,116

Loss on extinguishment of preferred stock - Series B		—		111		—		4,595

Interest expense on Convertible Senior Notes	Interest expense on Convertible Senior Notes	1,111		1,361		3,322		2,010		Interest expense on Convertible Senior Notes	1,117		—		2,231		—
Dividends on preferred stock - Series E (inclusive of deemed dividends)	Dividends on preferred stock - Series E (inclusive of deemed dividends)	6,059		90		11,434		90		Dividends on preferred stock - Series E (inclusive of deemed dividends)	8,162		—		17,892		—
Dividends on preferred stock - Series M (inclusive of deemed dividends)	Dividends on preferred stock - Series M (inclusive of deemed dividends)	734		4		1,113		4		Dividends on preferred stock - Series M (inclusive of deemed dividends)	1,133		—		2,324		—
Total	Total	$	7,806	$	1,801	$	19,818	$	7,204	Total	$	10,589	$	2,086	$	23,988	$	4,323
Weighted average diluted shares are not adjusted for:	Weighted average diluted shares are not adjusted for:									Weighted average diluted shares are not adjusted for:
Effect of unvested restricted shares	Effect of unvested restricted shares	47		89		33		100		Effect of unvested restricted shares	—		34		—		25

Effect of unvested performance stock units										Effect of unvested performance stock units	340		—		346		1
Effect of assumed conversion of operating partnership units	Effect of assumed conversion of operating partnership units	5,956		5,564		5,893		4,543		Effect of assumed conversion of operating partnership units	5,172		5,868		5,576		5,862
Effect of assumed conversion of preferred stock - Series B	Effect of assumed conversion of preferred stock - Series B	4,116		4,115		4,116		4,781		Effect of assumed conversion of preferred stock - Series B	4,116		4,116		4,116		4,116
Effect of assumed conversion of exchanged preferred stock - Series B		—		—		—		485

Effect of assumed conversion of Convertible Senior Notes	Effect of assumed conversion of Convertible Senior Notes	13,609		13,609		13,609		6,730		Effect of assumed conversion of Convertible Senior Notes	13,609		—		13,609		—
Effect of assumed conversion of preferred stock - Series E	Effect of assumed conversion of preferred stock - Series E	41,008		700		24,491		233		Effect of assumed conversion of preferred stock - Series E	102,751		—		101,478		—
Effect of assumed conversion of preferred stock - Series M	Effect of assumed conversion of preferred stock - Series M	4,563		32		1,941		11		Effect of assumed conversion of preferred stock - Series M	12,219		—		11,945		—
Total	Total	69,299		24,109		50,083		16,883		Total	138,207		10,018		137,070		10,004

11. Redeemable Noncontrolling Interests in Operating Partnership

Redeemable noncontrolling interests in the operating partnership represents the limited partners’ proportionate share of equity and their allocable share of equity in earnings/losses of Braemar OP, which is an allocation of net income/loss attributable to the common unitholders based on the weighted average ownership percentage of these limited partners’ common units of limited partnership interest in the operating partnership (the “common units”) and units issued under our Long-Term Incentive Plan (the “LTIP” units) that are vested. Each common unit may be redeemed, by the holder, for either cash or, at our sole discretion, up to one share of our REIT common stock, which is either: (i) issued pursuant to an effective registration statement; (ii) included in an effective registration statement providing for the resale of such common stock; or (iii) issued subject to a registration rights agreement.

LTIP units, which are issued to certain executives and employees of Ashford LLC as compensation, generally have vesting periods of three years. Additionally, certain independent members of the board of directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant. Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election, settled in our common stock. An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of our operating partnership at a time when our stock is trading at a level in excess of the price it was trading on the date of the LTIP issuance. More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of our operating partnership; or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for our operating partnership.

The compensation committee of the board of directors of the Company may authorize the issuance of Performance LTIP units to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of Performance LTIP units that will be settled in common units of Braemar OP, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date. As of ~~September~~June 30, ~~2022,~~2023, there were approximately ~~2.1~~2.4 million Performance LTIP units, representing 200% of the target, outstanding.

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

With respect to the 2020 award agreements, the number of Performance LTIP units actually earned may range from 0% to 200% of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date. The performance criteria for the Performance LTIP units are based on market conditions under the relevant literature. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

fair value of the award. The grant date fair value of the award may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.

In March ~~2022,~~2023, the Company granted approximately ~~1.2 million~~353,000 Performance LTIP units, representing 200% of the target, with an initial grant date fair value of ~~$5.89~~$3.86 per share and a vesting period of approximately three years. During the second quarter, ~~of 2022,~~ the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements. as of June 30, 2023. The ~~2022~~2023 awards, which were originally classified as liability awards, are now classified as equity awards, within temporary equity, which resulted in a remeasurement of the award at a new fair value of ~~$5.63~~$4.07 per share.

On May ~~11, 2022,~~10, 2023, approximately 45,000 LTIP units were issued to ~~our~~ independent directors, with a fair value of approximately ~~$252,000,~~$182,000, which vested immediately upon ~~grant.~~grant and have been expensed during the three and six months ended June 30, 2023.

As of ~~September~~June 30, ~~2022,~~2023, we have issued a total of approximately ~~3.5~~3.8 million LTIP and Performance LTIP units, net of Performance LTIP cancellations. All LTIP and Performance LTIP units, other than approximately ~~569,000~~614,000 LTIP units and ~~840,000~~1.2 million Performance LTIP units issued from March 2015 to May ~~2021,~~2023, had reached full economic parity with, and are convertible into, common units.

The following table presents the redeemable noncontrolling interests in Braemar OP ~~(in thousands)~~ and the corresponding approximate ownership percentage of our operating partnership:

September 30, 2022 December 31, 2021
Redeemable noncontrolling interests in Braemar OP $ 40,635 $ 36,087
Adjustments to redeemable noncontrolling interests (1)
$ 69 $ 275
Ownership percentage of operating partnership 7.66 % 8.83 %


	June 30, 2023			December 31, 2022
Redeemable noncontrolling interests in Braemar OP (in thousands)	$	35,174		$	40,555
Adjustments to redeemable noncontrolling interests (1) (in thousands)	$	77		$	70
Ownership percentage of operating partnership	6.63		%	7.69		%

(1) Reflects the excess of the redemption value over the accumulated historical cost.

We allocated net (income) loss to the redeemable noncontrolling interests as illustrated in the table below (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	$	1,166	$	823	$	(647)	$	3,184		Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	$	925	$	(846)	$	664	$	(1,813)
Distributions declared to holders of common units, LTIP units and Performance LTIP units	Distributions declared to holders of common units, LTIP units and Performance LTIP units	84		—		251		—			Distributions declared to holders of common units, LTIP units and Performance LTIP units	$	361	$	84	$	722	$	167

~~The following table presents~~On February 24, 2023, at the option of Mr. Monty J. Bennett, Mr. Bennett’s 169,523 vested LTIP units that achieved economic parity with his common units were redeemed for common units on a one-for-one basis. On February 24, 2023, the Company received a Notice of Exercise of Redemption Right (the “Redemption Notice”), pursuant to which Mr. Bennett elected to redeem the common units ~~redeemed~~ and such redemption was settled in cash at the ~~fair value~~Company’s election based on the average of the closing price of the Company’s common stock for the ten consecutive trading days ending on February 23, 2023. Additionally, on February 24, 2023, Mr. Bennett elected to redeem an additional 1,254,254 common units and following receipt of the Redemption Notice, such redemption was settled in cash at the Company’s election at a price per common unit based on the average of the closing price of the Company’s common stock for the ten consecutive trading days ending on February 23, 2023. The cash redemption ~~(in thousands):~~for the 1,423,777 common units totaled approximately $7.0 million.

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Common units converted to common stock — — — 2
Fair value of common units converted $ — $ — $ — $ 15

On May 12, 2023, the Company received a Notice of Redemption with respect to 32,500 vested common units, and such redemption was settled in cash at the Company’s election for approximately $123,000.

2220

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

12. Equity and Stock-Based Compensation

Common Stock Dividends—The following table summarizes the common stock dividends declared during the period (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Common stock dividends declared $ 719 $ — $ 2,159 $ —


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Common stock dividends declared	$	3,335	$	720	$	6,669	$	1,440

Restricted Stock—We incur stock-based compensation expense in connection with restricted stock awarded to certain employees of Ashford LLC and its affiliates. We also issue common stock to certain of our independent directors, which vests immediately upon issuance.

In May ~~2022,~~2023, approximately 45,000 shares of common stock were issued to ~~our~~ independent directors with a fair value of approximately ~~$252,000,~~$182,000, which vested immediately upon grant and have been expensed during the ~~nine~~three and six months ended~~September~~ June 30, ~~2022~~.2023.

Performance Stock Units—The compensation committee of the board of directors of the Company may authorize the issuance of grants of performance stock units (“PSUs”) to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date.

~~In March 2022, 41,000 PSUs with a fair value of $240,000 and a vesting period of~~ ~~three~~ ~~years were granted. The 2022 awards may be settled in cash or shares of the Company’s common stock solely at the option of the Company.~~ ~~During the second quarter,~~ ~~the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements~~. ~~The 2022 awards, which were originally classified as liability awards, are now classified as equity awards, which resulted in a remeasurement of the award at a new fair value of $229,000.~~

With respect to the 2021, 2022 and ~~2022~~2023 award agreements, the compensation committee shifted to a new performance metric, pursuant to which, the performance awards will be eligible to vest, from 0% to 200% of target, based on achievement of certain performance targets over the three-year performance period. The performance criteria for the 2021, 2022 and ~~2022~~2023 performance grants are based on performance conditions under the relevant literature, and the 2021, 2022 and ~~2022~~2023 performance grants were issued to non-employees. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the ~~grant~~corresponding measurement date fair value of the award, which may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.

In March 2023, 383,000 PSUs with a vesting period of approximately three years were granted. The 2023 awards may be settled in cash or shares of the Company’s common stock solely at the option of the Company. During the second quarter, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements as of June 30, 2023. The 2023 awards, which were originally classified as liability awards, are now classified as equity awards, which resulted in a remeasurement of the award at a new fair value of $1.6 million.

8.25% Series D Cumulative Preferred Stock—The dividend for all issued and outstanding shares of the Company’s Series D Cumulative Preferred Stock (the “Series D Preferred Stock”) is set at $2.0625 per annum per share.

The following table summarizes dividends declared (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Series D Cumulative Preferred Stock $ 825 $ 825 $ 2,475 $ 2,475


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Series D Cumulative Preferred Stock	$	825	$	825	$	1,650	$	1,650

Stock Repurchases—On December ~~5, 2017,~~7, 2022, our board of directors ~~reapproved the~~approved a new stock repurchase program pursuant to which the board ~~of directors~~ granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share, having an aggregate value of up to ~~$50~~$25 million. The board of directors’ authorization replaced any previous repurchase authorizations. ~~No shares were repurchased during~~During the ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021.~~2023, we repurchased 3.9 million shares of our common stock for approximately $18.9 million. As of ~~September~~June 30, ~~2022, $50 millionremains authorized by the board of directors pursuant to the December 5, 2017 approval.~~

~~Standby Equity Distribution Agreement—On February 4, 2021,~~2023, the Company ~~entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd. (“YA”), pursuant to which~~has completed the Company will be able to sell up to 7,780,786 shares of its common stock (the “Commitment Amount”) at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating on the earliest of: (i) the first day of the month next following the 36-month$25.0 million repurchase authorization.

2321

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

anniversary of the SEDA; or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”). Other than with respect to the Initial Advance (as defined below) the shares sold to YA pursuant to the SEDA would be purchased at 95% of the Market Price (as defined below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock. “Market Price” shall mean the lowest daily VWAP (as defined below) of the Company’s common stock during the five consecutive trading days commencing on the trading day following the date the Company submits an advance notice to YA. “VWAP” means, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the principal market as reported by Bloomberg L.P. during regular trading hours.

At any time during the Commitment Period the Company may require YA to purchase shares of the Company’s common stock by delivering a written notice to YA setting forth the Advance Shares (as defined in the SEDA) that the Company desires to issue and sell to YA (the “Advance Notice”). The Company may deliver an Advance Notice for an initial Advance for up to 1,200,000 Advance Shares (the “Initial Advance”). The preliminary purchase price per share for such shares shall be 100% of the average daily VWAP for the five consecutive trading days immediately prior to the date of the Advance Notice.

Pursuant to the SEDA, we currently intend to use the net proceeds from any sale of the shares for working capital purposes, including the repayment of outstanding debt. There are no other restrictions on future financing transactions. The SEDA does not contain any right of first refusal, participation rights, penalties or liquidated damages. We are not required to pay any additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $10,000 structuring fee. As of September 30, 2022, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $10.0 million under the SEDA.

~~The issuance activity under the SEDA is summarized below (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Common shares sold to YA — — — 1,700
Proceeds received $ — $ — $ — $ 10,000

~~Common Stock Resale Agreement~~—On April 21, 2021, the Company entered into a purchase agreement (the “Lincoln Park Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company may issue or sell to Lincoln Park up to 8,893,565 shares of the Company’s common stock from time to time during the term of the Lincoln Park Purchase Agreement.

Upon entering into the Lincoln Park Purchase Agreement, the Company issued 15,000 shares of the Company’s common stock as consideration for Lincoln Park’s execution and delivery of the Lincoln Park Purchase Agreement.

~~As of September 30, 2022, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $4.2 million under the Lincoln Park Purchase Agreement.~~

~~The issuance activity under the Lincoln Park Purchase Agreement is summarized below (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Common shares sold to Lincoln Park — — — 766
Additional commitment shares — — — 15
Total common shares issued to Lincoln Park — — — 781
Proceeds received $ — $ — $ — $ 4,217

~~At-the-Market Equity Distribution Agreement~~—On July 12, 2021, the Company entered into a second equity distribution agreement (the “Virtu July 2021 EDA”) with Virtu Americas LLC (“Virtu”) to sell from time to time shares of our common stock having an aggregate offering price of up to $100 million. We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~As of September 30, 2022, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.~~

~~The issuance activity under the Virtu July 2021 EDA is summarized below (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Common shares issued — 4,183 — 4,183
Gross proceeds received $ — $ 21,363 $ — $ 21,363
Commissions — 214 — 214
Net proceeds $ — $ 21,149 $ — $ 21,149

13. Redeemable Preferred Stock

5.50% Series B Cumulative Convertible Preferred Stock

Each share of our 5.50% Series B Cumulative Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) is convertible at any time, at the option of the holder, into a number of whole shares of common stock at a conversion price of $18.70 (which represents a conversion rate of 1.3372 shares of our common stock, subject to certain adjustments). The Series B Convertible Preferred Stock is also subject to conversion upon certain events constituting a change of control. Holders of the Series B Convertible Preferred Stock have no voting rights, subject to certain exceptions. The Series B Convertible Preferred Stock dividend for all issued and outstanding shares is set at $1.375 per annum per share.

The Company may, at its option, cause the Series B Convertible Preferred Stock to be converted in whole or in part, on a pro-rata basis, into fully paid and nonassessable shares of the Company’s common stock at the conversion price, provided that the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110% of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion.

Additionally, the Series B Convertible Preferred Stock contains cash redemption features that consist of: 1) an optional redemption in which on or after June 11, 2020, the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $25.00 per share, plus any accumulated, accrued and unpaid dividends; 2) a special optional redemption, in which on or prior to the occurrence of a Change of Control (as defined in the Articles Supplementary), the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $25.00 per share; and 3) a “REIT Termination Event” and “Listing Event Redemption,” in which at any time (i) a REIT Termination Event (as defined below) occurs or (ii) the Company’s 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 (each a “National Exchange”), the holder of Series B Convertible Preferred Stock shall have the right to require the Company to redeem any or all shares of Series B Convertible Preferred Stock at 103% of the liquidation preference ($25.00 per share, plus any accumulated, accrued, and unpaid dividends) in cash.

A “REIT Termination Event,” shall mean the earliest of:

(i) filing of a federal income tax return where the Company does not compute its income as a REIT;

(ii) stockholders’ approval on ceasing to be qualified as a REIT;

(iii) board of directors’ approval on ceasing to be qualified as a REIT;

(iv) board’s determination based on the advice of counsel to cease to be qualified as a REIT; or

(v) determination within the meaning of Section 1313(a) of the Code to cease to be qualified as a REIT.

Series B Convertible Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside our control. As such, the Series B Convertible Preferred Stock is classified outside of permanent equity.

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The following table summarizes dividends declared (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Series B Convertible Preferred Stock $ 1,059 $ 1,058 $ 3,175 $ 3,689

~~During 2021, Braemar entered into privately negotiated exchange agreements with certain holders of the Series B Convertible Preferred Stock, in reliance on Section 3(a)(9) of the Securities Act.~~

~~The table below summarizes the activity (in thousands):~~

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Preferred Shares Tendered Common Shares Issued Preferred Shares Tendered Common Shares Issued
Series B Convertible Preferred Stock 30 120 1,953 7,291

~~There were no preferred stock exchanges for the three and nine months ended September 30, 2022.~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Series B Convertible Preferred Stock	$	1,058	$	1,058	$	2,116	$	2,116

Series E Redeemable Preferred Stock

On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell, from time to time, shares of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”). Pursuant to such equity distribution agreements, the Company ~~is offering~~offered a maximum of 20,000,000 shares of Series E Preferred Stock in a primary offering at a price of $25.00 per share. On February 21, 2023, the Company announced the closing of its Series E Preferred Stock offering. The Company is also offering a maximum of 8,000,000 shares of the Series E Preferred Stock pursuant to a dividend reinvestment plan (the “DRIP”) at $25.00 per share (the “Stated Value”).

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The Series E Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred stock, the Series D Preferred Stock and the Series M Preferred Stock (as defined below)) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.

Holders of the Series E Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class. If and whenever dividends on any shares of the Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive, the number of directors then constituting the board shall be increased by two and the holders of such shares of Series E Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series E Preferred Stock) shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

Each share is redeemable at any time, at the option of the holder, at a redemption price of $25.00 per share, plus any accumulated, accrued and unpaid dividends, less a redemption fee. Starting on the second anniversary, each share is redeemable at any time, at the option of the Company, at a redemption price of $25.00 per share, plus any accumulated, accrued and unpaid dividends (with no redemption fee). The Series E Preferred Stock is also subject to conversion upon certain events constituting a change of control. Upon such change of control events, holders have the option to convert their shares of Series E Preferred Stock into a maximum of 5.69476 shares of our common stock.

The redemption fee shall be an amount equal to:

•8.0% of the stated value of $25.00 per share (the “Stated Value”) beginning on the Original Issue Date (as defined in the Articles Supplementary) of the shares of the Series E Preferred Stock to be redeemed;

•5.0% of the Stated Value beginning on the second anniversary from the Original Issue Date of the shares of the Series E Preferred Stock to be redeemed; and

•0% of the Stated Value beginning on the third anniversary from the Original Issue Date of the shares of the Series E Preferred Stock to be redeemed.

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal number of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption.

The Series E Preferred Stock cash dividends are as follows:

•8.0% per annum of the Stated Value beginning on the date of the first settlement of the Series E Preferred Stock (the “Date of Initial Closing”);

•7.75% per annum of the Stated Value beginning on the first anniversary from the Date of Initial Closing; and

•7.5% per annum of the Stated Value beginning on the second anniversary from the Date of Initial Closing.

Dividends ~~will be authorized and declared~~are payable on a monthly basis ~~and payable~~ in arrears on the 15th day of each month (or, if such payment date is not a business day, the next succeeding business day) to holders of record at the close of business on the last business day of each month immediately preceding the applicable ~~thereafter~~ dividend payment date. Dividends will be computed on the basis of twelve 30-day months and a 360-day year.

The Company has a DRIP that allows ~~for~~ participating holders to have their Series E Preferred Stock dividend distributions automatically reinvested in additional shares of the Series E Preferred Stock at a price of $25.00 per share.

The issuance activity of the Series E Preferred Stock is summarized below (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Series E Preferred Stock shares issued (1)	Series E Preferred Stock shares issued (1)	4,362		266		7,151		266		Series E Preferred Stock shares issued (1)	—		1,312		3,798		2,789

Net proceeds	Net proceeds	$	98,140	$	5,976	$	160,894	$	5,976	Net proceeds	$	—	$	29,518	$	85,444	$	62,754

__________________

(1)Exclusive of shares issued under the ~~dividend reinvestment plan.~~DRIP.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The Series E Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside of the Company’s control. As such, the Series E Preferred Stock is classified outside of permanent equity.

At the date of issuance, the carrying amount of the Series E Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable the carrying value will be adjusted to the redemption amount each reporting period.

The redemption value adjustment of Series E Preferred Stock is summarized below (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Series E Preferred Stock	Series E Preferred Stock	$	204,252	$	39,339	Series E Preferred Stock	$	379,403	$	291,076
Adjustments to Series E Preferred Stock (1)		$	7,413	$	3,128
Cumulative adjustments to Series E Preferred Stock (1)						Cumulative adjustments to Series E Preferred Stock (1)	$	11,775	$	9,403

________

(1) Reflects the excess of the redemption value over the accumulated carrying value.

The following table summarizes dividends declared (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Series E Preferred Stock $ 3,697 $ 90 $ 7,149 $ 90


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Series E Preferred Stock	$	7,986	$	2,053	$	15,520	$	3,452

The redemption activities of Series E Preferred Stock is summarized below (in thousands):

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Series E Preferred Stock shares redeemed 3 5
Redemption amount, net of redemption fees $ 84 $ 134

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Series E Preferred Stock shares redeemed	21		2		32		2
Redemption amount, net of redemption fees	$	507	$	50	$	789	$	50

Series M Redeemable Preferred Stock

On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell, from time to time, shares of the Series M Redeemable Preferred Stock (the “Series M Preferred Stock”). Pursuant to such equity distribution agreements, the Company ~~is offering~~offered a maximum of 20,000,000 shares of the Series M Preferred Stock (par value $0.01) in a primary offering at a price of $25.00 per share (or “Stated Value”). On February 21, 2023, the Company announced the closing of its Series M Preferred Stock offering. The Company is also offering a maximum of 8,000,000 shares of Series M Preferred Stock pursuant to the DRIP at $25.00 per share.

The Series M Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.

Holders of the Series M Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class. If and whenever dividends on any shares of Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive, the number of directors then constituting the board shall be increased by two and the holders of such shares of Series M Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series M Preferred Stock) shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

dividends (with no redemption fee). The Series M Preferred Stock is also subject to conversion upon certain events constituting a change of control. Upon such change of control events, holders have the option to convert their shares of Series M Preferred Stock into a maximum of 5.69476 shares of our common stock.

The redemption fee shall be an amount equal to:

•1.5% of the Stated Value of $25.00 per share beginning on the Series M Original Issue Date (as defined ~~below)~~in the Articles Supplementary) of the shares of Series M Preferred Stock to be redeemed; and

•0% of the Stated Value beginning on the first anniversary from the Series M Original Issue Date of the shares of Series M Preferred Stock to be redeemed.

Holders of Series M Preferred Stock are entitled to receive cumulative cash dividends at the initial rate of 8.2% per annum of the Stated Value of $25.00 per share (equivalent to an annual dividend rate of $2.05 per share). Beginning one year from the date of original issuance of each share of Series M Preferred Stock ~~(the “Series M Original Issue Date”)~~ and on each one-year anniversary thereafter for such share of Series M Preferred Stock, the dividend rate shall increase by 0.10% per annum; provided, however that the dividend rate for any share of Series M Preferred Stock shall not exceed 8.7% per annum of the Stated Value.

Dividends ~~will be authorized and declared~~are payable on a monthly basis and ~~payable~~ in arrears on the 15th day of each month (or, if such payment date is not a business day, on the next succeeding business day) to holders of record at the close of business on the last business day of each month immediately preceding the applicable dividend payment date. Dividends will be computed on the basis of twelve 30-day months and a 360-day year.

The Company has a DRIP that allows ~~for~~ participating holders to have their Series M Preferred Stock dividend distributions automatically reinvested in additional shares of the Series M Preferred Stock at a price of $25.00 per share.

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The issuance activity of Series M Preferred Stock is summarized below (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Series M Preferred Stock shares issued (1)	Series M Preferred Stock shares issued (1)	673		15		1,040		15		Series M Preferred Stock shares issued (1)	—		334		531		367

Net proceeds	Net proceeds	$	16,311	$	355	$	25,208	$	355	Net proceeds	$	—	$	8,087	$	12,869	$	8,897

__________________

(1)Exclusive of shares issued under the ~~dividend reinvestment plan.~~DRIP.

The Series M Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside the Company’s control. As such, the Series M Preferred Stock is classified outside of permanent equity.

At the date of issuance, the carrying amount of the Series M Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable the carrying value will be adjusted to the redemption amount each reporting period.

The redemption value adjustment of Series M Preferred stock is summarized below (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Series M Preferred Stock	Series M Preferred Stock	$	26,274	$	715	Series M Preferred Stock	$	48,405	$	35,182
Adjustments to Series M Preferred Stock (1)		$	650	$	133
Cumulative adjustments to Series M Preferred Stock (1)						Cumulative adjustments to Series M Preferred Stock (1)	$	1,195	$	812

__________________

(1) Reflects the excess of the redemption value over the accumulated carrying value.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes dividends declared (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Series M Preferred Stock $ 447 $ 4 $ 596 $ 4


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Series M Preferred Stock	$	1,008	$	128	$	1,941	$	149

The redemption activities of Series M Preferred Stock is summarized below (in thousands):


		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022			Three Months Ended June 30,		Six Months Ended June 30,
									2023		2022		2023		2022
Series M Preferred Stock shares redeemed	Series M Preferred Stock shares redeemed	2			2			Series M Preferred Stock shares redeemed	4		—		5		—
Redemption amount, net of redemption fees	Redemption amount, net of redemption fees	$	59		$	59		Redemption amount, net of redemption fees	$	90	$	—	$	115	$	—

14. Related Party Transactions

Ashford Inc.

Advisory Agreement

Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor. Our chairman, Mr. Monty Bennett, also serves as chairman of the board of directors and chief executive officer of Ashford Inc. Under our advisory agreement, we pay advisory fees to Ashford LLC. We pay a monthly base fee equal to 1/12th of the sum of (i) 0.70% of the total market capitalization of our company for the prior month, plus (ii) the Net Asset Fee Adjustment (as defined in our advisory agreement), if any, on the last day of the prior month during which our advisory agreement was in effect; provided, however, in no event shall the base fee for any month be less than the minimum base fee as provided by our advisory agreement. The base fee is payable on the fifth business day of each month.

The minimum base fee for Braemar for each month will be equal to the greater of:

▪90% of the base fee paid for the same month in the prior year; and

▪1/12th of the G&A Ratio (as defined) multiplied by the total market capitalization of Braemar.

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

We are also required to pay Ashford LLC an incentive fee that is measured annually (or for a stub period if the advisory agreement is terminated at other than year-end). Each year that our annual total stockholder return exceeds the average annual total stockholder return for our peer group we pay Ashford LLC an incentive fee over the following three years, subject to the Fixed Charge Coverage Ratio (“FCCR”) Condition, as defined in the advisory agreement, which relates to the ratio of adjusted EBITDA to fixed charges. We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, risk management advisory and asset management services, as specified in the advisory agreement. We also recorded equity-based compensation expense for equity grants of common stock, PSUs and LTIP units awarded to officers and employees of Ashford LLC in connection with providing advisory services.

The following table summarizes the advisory services fees incurred (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Advisory services fee	Advisory services fee										Advisory services fee
Base advisory fee	Base advisory fee	$	3,269	$	2,758	$	9,434	$	7,981		Base advisory fee	$	3,667	$	3,226	$	7,307	$	6,165
Reimbursable expenses (1)	Reimbursable expenses (1)	1,191		694		3,460		1,696			Reimbursable expenses (1)	2,042		1,173		4,064		2,269
Equity-based compensation (2)	Equity-based compensation (2)	3,346		2,994		8,293		6,666			Equity-based compensation (2)	2,506		2,637		4,792		4,947
Incentive fee	Incentive fee	1,048		(1,637)		1,294		—			Incentive fee	—		(731)		—		246
Total	Total	$	8,854	$	4,809	$	22,481	$	16,343		Total	$	8,215	$	6,305	$	16,163	$	13,627

________

(1)Reimbursable expenses include overhead, internal audit, risk management advisory, asset management services and deferred cash awards.

(2) Equity-based compensation is associated with equity grants of Braemar’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Pursuant to the ~~Company's~~Company’s hotel management agreements with each hotel management company, the Company bears the economic burden for casualty insurance coverage. Under the advisory agreement, Ashford Inc. secures casualty insurance policies to cover Braemar, Ashford Hospitality Trust, Inc. (“Ashford Trust”), their hotel managers, as needed, and Ashford Inc. The total loss estimates included in such policies are based on the collective pool of risk exposures from each party. Ashford Inc.'s’s risk management department manages the casualty insurance program. Each year Ashford Inc.'s’s risk management department collects funds from Braemar, Ashford Trust and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.

On September 27, 2022, an agreement was entered into by Ashford Inc., Ashford Trust and Braemar pursuant to which the Advisor is to implement the REITs’ cash management strategies. This will include actively managing the REITs excess cash by primarily investing in short-term U.S. Treasury securities. The annual fee is equal to the lesser of (i) 20 bps of the average daily balance of the funds managed by the Advisor and (ii) the actual rate of return realized by the cash management strategies; provided that in no event will the cash management fee be less than zero. The fee is payable monthly in arrears.

As of ~~September~~June 30, ~~2022 and December 31, 2021, due from related parties, net included~~2023, “due to Ashford Inc.” includes a $365,000 security deposit paid to Remington Hotel Corporation ~~an entity indirectly owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr.,~~(“RHC”) for office space allocated to us under our advisory agreement. It will be held as security for the payment of our allocated share of the office space rental. If unused it will be returned to us upon lease expiration or earlier termination. As of December 31, 2022, RHC was indirectly owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. and the $365,000 was included in “due from related parties, net.” On January 3, 2023, Ashford Inc. acquired RHC.

On March 10, 2022, the Company entered into a Limited Waiver Under Advisory Agreement (the “2022 Limited Waiver”) with Braemar OP, Braemar TRS and its advisor. The advisory agreement (i) allocates responsibility for certain employee costs between the Company and its advisor and (ii) permits the Company’s board of directors to issue annual equity awards in the Company or Braemar OP to employees and other representatives of its advisor based on achievement by the Company of certain financial or other objectives or otherwise as the Company’s board of directors sees fit. Pursuant to the 2022 Limited Waiver, the Company, Braemar OP, Braemar TRS and the Company’s advisor waived the operation of any provision in the advisory agreement that would otherwise have limited our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2022 cash incentive compensation to employees and other representatives of our advisor.

On March 2, 2023, the Company entered into a second Limited Waiver Under Advisory Agreement (the “2023 Limited Waiver”) with Braemar OP, Braemar TRS and its advisor. Pursuant to the 2023 Limited Waiver, the Company, Braemar OP, Braemar TRS and the Company’s advisor waived the operation of any provision in the advisory agreement that would otherwise limit our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2023 cash incentive compensation to employees and other representatives of our advisor.

Lismore

We engage Lismore or its subsidiaries to provide debt placement services and assist with loan modifications on our behalf.

In ~~connection~~June 2023, we entered into various 12-month agreements with ~~the refinancing~~Lismore to seek modifications or refinancings of certain mortgage debt of the ~~Park Hyatt Beaver Creek mortgage loan in February 2022,~~Company. For the ~~Company paid an affiliate of Lismore Capital II LLC (“Lismore”) a fee~~three and six months ended June 30, 2023, we incurred fees of approximately ~~$637,000.~~$150,000 to Lismore isin nonrefundable work fees. The unamortized fees are included in “other assets”on the condensed consolidated balance sheet, and are amortized on a ~~subsidiary~~straight line basis over the term of ~~Ashford Inc.~~the agreement.

In addition to the fees described above, we incurred fees from Lismore or its subsidiaries of $98,000 for both three and six months ended June 30, 2023 and $0 and $637,000 for the three and six months ended June 30, 2022.

Ashford Securities

On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by Ashford Inc., Ashford Trust and Braemar (collectively, the “Parties” and each individually a “Party”) with respect to funding certain expenses ~~to be reimbursed to~~of Ashford Securities LLC, a subsidiary of Ashford Inc. (“Ashford Securities”). Beginning on the effective date of the Amended and Restated Contribution Agreement, costs ~~will be~~were allocated based upon an allocation percentage of 50% to Ashford Inc., 50% to Braemar and 0% to Ashford Trust. Upon reaching the earlier of $400 million in aggregate capital raised, or June 10, 2023, there will be ~~an amended and restated~~a true up (the “Amended and Restated True-Up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual ~~expense reimbursement paid~~amount contributed by each company will be based on the actual amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively, through Ashford ~~Securities. After~~Securities (the

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

resulting ratio of contributions among the ~~Amended and Restated True-Up Date,~~Parties, the ~~expense reimbursements will be allocated among Ashford Inc., Ashford Trust and Braemar quarterly based on the actual capital raised through Ashford Securities.~~“Initial True-up Ratio”). On January 27, 2022, Ashford Trust, Braemar and Ashford Inc. entered into a Second Amended and Restated Contribution Agreement which provided for an additional $18 million in expenses to be reimbursed with all expenses allocated 45% to Ashford Trust, 45% to Braemar and 10% to Ashford Inc.

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~On February 1, 2023, Braemar entered into a Third Amended and Restated Contribution Agreement with Ashford Inc. and Ashford Trust. The Third Amended and Restated Contribution Agreement states that after the Amended and Restated True-Up Date occurs, capital contributions for the remainder of fiscal year 2023 will be divided between each Party based on the Initial True-Up Ratio. Thereafter on a yearly basis at year-end, starting with the year-end of 2023, there will be a true-up between the Parties whereby there will be adjustments so that the capital contributions made by each Party will be based on the cumulative amount of capital raised by each Party through Ashford Securities as a percentage of the total amount raised by the Parties collectively through Ashford Securities since June 10, 2019 (the resulting ratio of capital contributions among Braemar, Ashford Inc. and Ashford Trust following this true-up, the “Cumulative Ratio”). Thereafter, the capital contributions will be divided among each Party in accordance with the Cumulative Ratio, as recalculated at the end of each year.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~As of September 30, 2022, Braemar has funded approximately $4.9 million.~~ During the ~~third quarter of~~year ended December 31, 2022, the funding estimate was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities. As of December 31, 2022, Braemar had funded approximately $5.8 million and had a payable, included in “due to Ashford Inc., net” on the condensed consolidated balance sheet, of ~~This resulted in additional expense~~approximately $6.6 million. In March 2023, Braemar paid Ashford Inc. $8.7 million as a result of the contribution true-up between entities described above. As of June 30, 2023, Braemar has funded approximately ~~$5.2~~$17.9 million. As of ~~September~~June 30, ~~2022 there was~~2023, Braemar has a ~~payable~~pre-funded balance of approximately ~~$4.5~~$1.9 million that is included in “other assets” and approximately $1.5 million that is included in “due to Ashford Inc., net” ~~on the condensed consolidated balance sheet.~~ ~~As of December 31, 2021,~~ ~~$338,000~~ ~~of the pre-funded amount was included in “other assets”~~ on the condensed consolidated balance sheet.

The table below summarizes the amount Braemar has expensed related to reimbursed operating expenses of Ashford Securities (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
Line Item 2022 2021 2022 2021
Corporate, general and administrative $ 5,520 $ 642 $ 6,711 $ 1,505

~~Enhanced Return Funding Program~~

Concurrent with Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement with Ashford Inc. (“Amendment No. 1”), on January 15, 2019, the Company also entered into the Enhanced Return Funding Program Agreement (the “ERFP Agreement”) with Ashford Inc. The “key money investments” concept previously contemplated by our advisory agreement was replaced with the ERFP Agreement. The Fifth Amended and Restated Advisory Agreement was also amended to name Ashford Inc. and its subsidiaries as the Company’s sole and exclusive provider of asset management, design and construction and other services offered by Ashford Inc. or any of its subsidiaries. The independent members of our board of directors and the independent members of the board of directors of Ashford Inc., with the assistance of separate and independent legal counsel, engaged to negotiate the ERFP Agreement on behalf of Braemar and Ashford Inc., respectively.

The ERFP Agreement generally provides that Ashford LLC will provide funding to facilitate the acquisition of properties by Braemar OP that are recommended by Ashford LLC, in an aggregate amount of up to $50 million (subject to increase to up to $100 million by mutual agreement). Each funding will equal 10% of the property acquisition price and will be made either at the time of the property acquisition or at any time generally within the two-year period following the date of such acquisition, in exchange for FF&E for use at the acquired property or any other property owned by Braemar OP.

The initial term of the ERFP Agreement was two years (the “Initial Term”). At the end of the Initial Term, the ERFP Agreement automatically renewed for one year and shall automatically renew for successive one-year periods (each such period a “Renewal Term”) unless either Ashford Inc. or Braemar provides written notice to the other at least 60 days in advance of the expiration of the Initial Term or Renewal Term, as applicable, that such notifying party intends not to renew the ERFP Agreement. On November 8, 2021, the Company received written notice from the Advisor of its intention not to renew the ERFP program. As a result, the ERFP Agreement terminated in accordance with its terms on January 15, 2022.


	Three Months Ended June 30,				Six Months Ended June 30,
Line Item	2023		2022		2023		2022
Corporate, general and administrative	$	1,024	$	664	$	2,219	$	1,191

Design and Construction Services

In connection with Ashford Inc.’s August 8, 2018 acquisition of Remington Lodging’s design and construction business, we entered into a design and construction services agreement with Ashford Inc.’s subsidiary, Premier Project Management LLC (“Premier”), ~~pursuant to which Premier~~a subsidiary of Ashford Inc., provides design and construction services to our hotels, including construction management, interior design, architectural services, and the purchasing, freight management and supervision of installation of FF&E and related services. Pursuant to the design and construction services agreement, we pay Premier: (a) design and construction fees of up to 4% of project costs; and (b) for the following services: (i) architectural (6.5% of total construction costs); (ii) construction management for projects without a general contractor (10% of total construction costs); (iii) interior design (6% of the purchase price of the FF&E designed or selected by Premier); and (iv) FF&E purchasing (8% of the purchase price of FF&E purchased by Premier; provided that if the purchase price exceeds $2.0 million for a single hotel in a calendar year, then the purchasing fee is reduced to 6% of the FF&E purchase price in excess of $2.0 million for such hotel in such calendar year). On March 20, 2020, we amended the design and construction services agreement to provide that Premier’s fees shall be paid by the Company to Premier upon the completion of any work provided by third-party vendors to the Company.

Hotel Management Services

At ~~September~~June 30, ~~2022,~~2023, Remington ~~Hotels~~Hospitality managed four of our 1516 hotel properties.

We pay monthly hotel management fees equal to the greater of approximately $16,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues as well as annual incentive management fees, if certain

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

Pursuant to the terms of the Letter Agreement dated March 13, 2020 (the “Hotel Management Letter Agreement”), in order to allow Remington Hotels to better manage its corporate working capital and to ensure the continued efficient operation of our hotels, we agreed to pay the base fee and to reimburse all expenses on a weekly basis for the preceding week, rather than on a monthly basis. The Hotel Management Letter Agreement went into effect on March 13, 2020 and will continue until terminated by us.

We also have a mutual exclusivity agreement with Remington Hotels, pursuant to which: (i) we have agreed to engage Remington Hotels to provide management services with respect to any hotel we acquire or invest in, to the extent we have the right and/or control the right to direct the management of such hotel; and (ii) Remington Hotels has agreed to grant us a right of first refusal to purchase any opportunity to develop or construct a hotel that it identifies that meets our initial investment guidelines. We are not, however, obligated to engage Remington Hotels if our independent directors either: (i) unanimously vote to hire a different manager or developer; or (ii) by a majority vote elect not to engage such related party because either special circumstances exist such that it would be in the best interest of our Company not to engage such related party, or, based on related party’s prior performance, it is believed that another manager could perform the management or other duties materially better.

~~Ashford Trust~~

As of December 31, 2021, the Company had a $728,000 receivable from Ashford Trust, included in “due from related parties, net.” The receivable relates to a legal settlement between Ashford Trust and the City of San Francisco regarding a transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off from Ashford Trust. The transfer taxes were initially paid by Braemar at the time of the spin-off. In January 2022, the City of San Francisco remitted payment to Ashford Trust, which subsequently remitted payment to Braemar. During the second quarter of 2022 the Company received an additional payment of approximately $114,000 related to accrued interest on the initial settlement amount, which is included in “(gain) loss on legal settlements” on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022.

15. Commitments and Contingencies

Restricted Cash—Under certain management and debt agreements for our hotel properties existing at ~~September~~June 30, ~~2022,~~2023, escrow payments are required for insurance, real estate taxes and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4%3% to 5% of gross revenues for capital improvements.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Licensing Fees—In conjunction with the Mr. C Beverly Hills Hotel acquisition on August 5, 2021, we entered into an Intellectual Property ~~Sublease~~Sublicense Agreement, which allows us to continue to use certain proprietary marks associated with the Mr. C brand name. In return, we pay licensing fees of: (i) 1% of total operating revenue; (ii) 2% of gross food and beverage revenues; and (iii) 25% of food and beverage profits. The agreement ~~expires~~expired on August 5, 2023.

The table below summarizes the licensing fees incurred (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
Line Item	Line Item	2022		2021		2022		2021		Line Item	2023		2022		2023		2022
Other hotel expenses	Other hotel expenses	$	76	$	53	$	367	$	53	Other hotel expenses	$	172	$	189	$	374	$	291

Management Fees—Under hotel management agreements for our hotel properties existing at ~~September~~June 30, ~~2022,~~2023, we pay a monthly hotel management fee equal to the greater of approximately $16,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues, or in some cases 3.0% to 5.0% of gross revenues, as well as annual incentive management fees, if applicable. These management agreements expire from December ~~2023~~2027 through December 2065, with renewal options. If we terminate a management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term, liquidated damages or, in certain circumstances, we may substitute a new management agreement.

Income Taxes—We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years ~~2017~~2018 through ~~2021~~2022 remain subject to potential examination by certain federal and state taxing authorities.

~~BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

Litigation—On October 24, 2019, the Company provided notice to Accor of the material breach of Accor’s responsibilities under the Accor management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago, Illinois. On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York County, seeking a declaratory judgment that no breach under the Accor management agreement has occurred and an injunction to prevent Ashford TRS Chicago II from terminating the Accor management agreement. Accor’s complaint was dismissed on or about February 27, 2020. On January 6, 2020, Ashford TRS Chicago II filed a complaint against Accor in the Supreme Court of the State of New York, New York County, alleging breach of the Accor management agreement and seeking damages and a declaration of its right to terminate the Accor management agreement. On July 20, 2020, Accor filed an Amended Answer and Counterclaims against Ashford TRS Chicago II, in which Accor asserted two causes of action: First, Accor asserted a counterclaim for declaratory judgment that Accor correctly calculated the amount payable to Ashford TRS Chicago II under the Accor management agreement to “cure” Accor’s performance test failure (the “Cure Amount”). Second, Accor asserted a counterclaim for breach of contract alleging that Ashford TRS Chicago II breached the Accor management agreement by wrongfully maintaining that the Cure Amount for the 2018 and 2019 Performance Test failure is $1,031,549 instead of $535,120. On February 16, 2022, the parties entered into a settlement agreement agreeing to: 1) amend the Accor management agreement; 2) dismiss the lawsuit and counterclaims; 3) stipulate to the failure of the performance tests and cure amounts for 2018 of $867,682 and 2019 of $784,919; and 4) arbitrate whether the performance tests for 2020 and 2021 were valid and/or required equitable adjustment. On February 23, 2022, Ashford TRS Chicago II and Accor filed a stipulation of discontinuance dismissing all claims, counterclaims, and cross-claims in the January 6, 2020 action with prejudice. Arbitration occurred on October 12-13, 2022 and the arbitrator’s deadline for delivering a decision is December 9, 2022. As a result of the settlement related to the 2018 performance test failure, the Company recorded a gain of approximately $868,000 during the first quarter of 2022, that is recorded as a reduction of management fees and included in “management fees” on the Company’s condensed consolidated statements of operations.

On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: ~~(1)~~(i) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and ~~(2)~~(ii) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class; however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. The opt out period has been extended until such time that discovery has concluded. In May 2023 the trial court requested additional briefing from the parties to determine whether the case should be maintained, dismissed, or the class de-certified. The trial court set a due date of August 7, 2023 for the briefs. If this litigation goes to trial, we expect that the earliest the trial would occur is the last quarter of 2023, based on various extensions to which the parties have agreed. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time. As of ~~September~~June 30, ~~2022,~~2023, no amounts have been accrued.

We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the ~~ADA~~Americans with Disability Act and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations or cash flow. However, our assessment may change depending upon the development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty. If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations or cash flows could be materially adversely affected in future periods.

16. Segment Reporting

We operate in one business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refers to owning hotel properties through either acquisition or new development. We report operating results of direct hotel

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics and exhibit similar long-term financial performance. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, all of our hotel properties were in the U.S. and its territories.

17. Subsequent Events

On July 31, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with Braemar OP (the “Borrower”), the lenders party thereto (the “Lenders”) and Bank of America, N.A., as administrative agent and L/C Issuer (as defined in the Credit Agreement). Bank of America, N.A. acted as administrative agent and lead arranger on the transaction. Syndicate bank participants include TBK Bank and MidFirst Bank.

The Credit Agreement evidences a $200 million senior secured credit facility (the “Facility”) comprised of a senior secured term loan facility of $150 million (the “Term Loan Facility”) and a senior secured revolving credit facility of $50 million (the “Revolving Credit Facility”). Upon satisfaction of certain conditions, including the addition of new Borrowing Base Properties (as defined in the Credit Agreement), the Facility may be increased to a size of not more than $400 million in the aggregate. The maximum availability under the Facility is determined on a quarterly basis and limited to the lesser of (i) $200 million (subject to increase of up to $400 million in the aggregate); (ii) 55% of the appraised value of all Borrowing Base Properties; and (iii) the DSC Amount (as defined below). The initial Borrowing Base Properties include the Company’s Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville hotel properties (the “Initial Borrowing Base Properties”). The “DSC Amount” means the maximum principal amount that can be supported from the Adjusted NOI (as defined in the Credit Agreement) from the Borrowing Base Properties assuming (i) a 30-year amortization and an interest rate which is the greater of (a) the ten (10) year U.S. Treasury Rate plus 2.50% and (b) 7.50%; and (ii) a minimum debt service coverage of 1.75 to 1.00.

The proceeds of the Term Loan Facility were used to repay the mortgage debt associated with The Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville, which will serve as the Initial Borrowing Base Properties for the financing. In addition, at closing, the Company drew down approximately $46 million under the Revolving Credit Facility.

The Facility is a three-year interest-only facility with all outstanding principal due at maturity, with a one-year extension option, subject to the satisfaction of certain conditions including the payment of an Extension Fee (as defined in the Credit Agreement) equal to 20 basis points (0.20%) of the outstanding Facility amount.

The Credit Agreement is guaranteed by the Company, the Borrower and certain other eligible subsidiaries of the Company and secured by: (i) perfected lien mortgages or deeds of trust and security interests in the Borrowing Base Properties (as defined in the Credit Agreement); (ii) assignments of leases and rents with respect to the Borrowing Base Properties; (iii) assignments of all management agreements, franchise agreements, licenses and other material agreements relating to the Borrowing Base Properties; (iv) perfected first priority liens on all reserve accounts and all operating accounts related to each Borrowing Base Property; and (v) perfected first priority liens on and security interests in each subsidiary guarantor owning a Borrowing Base Property.

Borrowings under the Credit Agreement will bear interest at Daily SOFR or Term SOFR plus 10 basis points (with a 0% floor) plus the applicable margin. Depending on the Company’s Net Debt to EBITDA ratio, the applicable margin for SOFR ranges from 2.25% to 3.00%. Default interest would accrue at the applicable rate plus 2.0%.

The Facility contains customary terms, covenants, negative covenants, events of default, limitations and other conditions for credit facilities of this type. Subject to certain exceptions, the Company and the Borrower are subject to restrictions on incurring additional indebtedness and liens, investments, mergers and fundamental changes, sales or other dispositions of property, dividends and stock redemptions, changes in the nature of the Borrower’s business, transactions with affiliates and burdensome agreements.

Financial covenants are generally based on the financial condition and results of operations of the Company and its consolidated subsidiaries and include, among others, the following:

(i) a Consolidated Leverage Ratio (i.e., Consolidated Net Debt to the Consolidated Total Asset Value) of not more than 55%; and

(ii) a Consolidated Fixed Charge Coverage Ratio (FCCR) (i.e., the ratio of Consolidated Adjusted EBITDA to Consolidated Fixed Charges) of not less than (i) prior to December 31, 2024, 1.1 to 1.0 and (ii) thereafter, 1.25 to 1.0.

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

~~17. Restatement~~

~~Subsequent~~The Credit Agreement includes customary events of default, and the occurrence of an event of default will permit the Lenders to terminate commitments to lend under the ~~issuance~~Credit Agreement and accelerate payments of the Company’s financial statements for the three and nine months ended September 30, 2022, an error was identified relating to the treatment of deemed dividends in the determination of net income (loss) attributable to common stockholders. The Company has restated its condensed consolidated statements of operations for the three and nine months ended September 30, 2022 to record a $2.6 million and $4.8 million redemption value adjustment, respectively, associated with the Company’s Series E Redeemable Preferred Stock and Series M Redeemable Preferred Stock, which would have decreased/increased net income/loss attributable to common stockholders and income/loss per share. Theseall amounts were reflected in the condensed consolidated statements of equity for the three and nine months ended September 30, 2022, in the line item titled “redemption value adjustment - preferred stock.” The restatement also impacted note 10, which was restated in these condensed consolidated financial statements. The restatement had no impact on the Company’s condensed consolidated balance sheet as of September 30, 2022, the condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2022 or the condensed consolidated statement of cash flows for the nine months ended September 30, 2022. Management evaluated the impact on other periods impacted by the error and determined it was immaterial.

The effect of correcting this misstatement resulted in a restatement of the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2022 as shown in the table below (amounts in thousands except per share amounts):

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
As Originally Reported Adjustment As Restated As Originally Reported Adjustment As Restated
Condensed Consolidated Statement of Operations
Deemed dividend on redeemable preferred stock $ — $ (2,649) $ (2,649) $ — $ (4,802) $ (4,802)
Net income (loss) attributable to common stockholders $ (14,068) $ (2,649) $ (16,717) $ 7,594 $ (4,802) $ 2,792
Income (loss) per share - basic:
Net income (loss) allocated to common stockholders per share $ (0.20) $ (0.04) $ (0.24) $ 0.11 $ (0.07) $ 0.04
Income (loss) per share - diluted:
Net income (loss) allocated to common stockholders per share $ (0.20) $ (0.04) $ (0.24) $ 0.11 $ (0.07) $ 0.04

~~18. Subsequent Events~~

Subsequent to September 30, 2022, the Company issued approximately 1.4 million shares of Series E Preferred Stock and received net proceeds of approximately $32.5 million and issued approximately 171,000 shares of Series M Preferred Stock and received net proceeds of approximately $4.1 million.

~~On October 31, 2022, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement~~”) to acquire a 100% interest in the 210-room Four Seasons Resort Scottsdale at Troon North for $267.8 million in cash. As required by the Purchase Agreement, the Company has deposited $26.8 million into escrow pending the closing or termination of the Purchase Agreement. The acquisition is expected to close by December 31, 2022, subject to certain customary closing conditions.outstanding thereunder.

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Table of Contents

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used in this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the references to “we,” “us,” “our,” the “Company” or “Braemar” refer to Braemar Hotels & Resorts Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Braemar Hospitality Limited Partnership, a Delaware limited partnership, which we refer to as “our operating partnership” or “Braemar OP.” “Our TRSs” refers to our taxable REIT subsidiaries, including Braemar TRS Corporation, a Delaware corporation, which we refer to as “Braemar TRS,” and its subsidiaries, together with the two taxable REIT subsidiaries that lease our two hotels held in a consolidated joint venture and are wholly-owned by the joint venture and the U.S. Virgin Islands’ (“USVI”) taxable REIT subsidiary that owns The Ritz-Carlton St. Thomas hotel. “Ashford Trust” refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership and Ashford Trust’s operating partnership, which we refer to as “Ashford Trust OP.” “Ashford Inc.” refers to Ashford Inc., a Nevada corporation and, as the context may require, its consolidated subsidiaries. “Ashford LLC” or our “advisor” refers to Ashford Hospitality Advisors LLC, a Delaware limited liability company and a subsidiary of Ashford Inc. “Premier” refers to Premier Project Management LLC, a Maryland limited liability company and a subsidiary of Ashford LLC. “Remington ~~Hotels”~~Hospitality” refers to the same entity after the acquisition was completed resulting in Remington Lodging & Hospitality, LLC becoming a subsidiary of Ashford Inc.

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains registered trademarks that are the exclusive property of their respective owners, which are companies other than us, including Marriott International®, Hilton Worldwide®, Sofitel®, Hyatt® and Accor®.

FORWARD-LOOKING STATEMENTS

Throughout this Form 10-Q, we make forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature:

•our business and investment strategy;

•anticipated or expected purchases or sales of assets;

•our projected operating results;

•completion of any pending transactions;

•our understanding of our competition;

•projected capital expenditures; and

•the impact of technology on our operations and business.

Such forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our securities.

Additionally, the following factors could cause actual results to vary from our forward-looking statements:

•the factors discussed in our Form 10-K for the year ended December 31, ~~2021,~~2022, as filed with the Securities and Exchange Commission (the “SEC”) on March 10, ~~2022~~2023 (the ~~“2021~~“2022 10-K”), including those set forth under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties;” and other filings under the Exchange Act;

•~~changes in~~rising interest ~~rates;~~rates and inflation;

•macroeconomic conditions, such as a prolonged period of weak economic growth, and volatility in capital markets;

•uncertainty in the business sector and market volatility due to the recent failures of Silicon Valley Bank, New York Signature Bank and First Republic Bank;

•extreme weather conditions may cause property damage or interrupt business;

•our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our liquidity requirements;

•general volatility of the capital markets and the market price of our common and preferred stock;

•general business and economic conditions affecting the lodging and travel industry;

•changes in our business or investment strategy;

~~Table of Contents~~

•availability, terms and deployment of capital;

•unanticipated increases in financing and other costs, including a rise in interest rates;

•changes in our industry and the markets in which we operate, interest rates, or local economic conditions;

•the degree and nature of our competition;

•actual and potential conflicts of interest with Ashford Trust, Ashford Inc. and its subsidiaries (including Ashford LLC, Remington ~~Hotels~~Hospitality and Premier) and our executive officers and our non-independent director;

•changes in personnel of Ashford LLC or the lack of availability of qualified personnel;

•changes in governmental regulations, accounting rules, tax rates and similar matters;

•legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”) and related rules, regulations and interpretations governing the taxation of REITs;

•limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and

•future sales and issuances of our common stock or other securities might result in dilution and could cause the price of our common stock to decline.

When considering forward-looking statements, you should keep in mind the matters summarized under “Item 1A. Risk Factors” in Part I of our ~~2021~~2022 10-K and this Form 10-Q, and the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, could cause our actual results and performance to differ significantly from those contained in our forward-looking statements. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 outbreak and the numerous government travel restrictions imposed in response thereto. The extent to which COVID-19 impacts us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Form 10-Q. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Form 10-Q to conform these statements to actual results and performance, except as may be required by applicable law.

Overview

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 ~~$144~~$187 for the year ended December 31, ~~2021.~~2022. 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.

We operate in the direct hotel investment segment of the hotel lodging industry. As of ~~September~~June 30, ~~2022,~~2023, we owned interests in 1516 hotel properties in ~~six~~seven states, the District of Columbia, Puerto Rico and St. Thomas, U.S. Virgin Islands with ~~3,971~~4,192 total rooms, or ~~3,736~~3,957 net rooms, excluding those attributable to our joint venture partner. The hotel properties in our current portfolio are predominantly located in U.S. urban markets and resort locations with favorable growth characteristics resulting from multiple demand generators. We own 1314 of our hotel properties directly, and the remaining two hotel properties through an investment in a majority-owned consolidated entity.

We are advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.

We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them for us under management contracts. As of ~~September~~June 30, ~~2022,~~2023, Remington ~~Hotels,~~Hospitality, a subsidiary of Ashford Inc., managed four of our 1516 hotel properties. Third-party management companies managed the remaining hotel properties.

Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to design and construction services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory and brokerage services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and mobile key technology.

~~Table of Contents~~

Mr. Monty J. Bennett is chairman and chief executive officer of Ashford Inc. and, together with Mr. Archie Bennett, Jr., as of ~~September~~June 30, ~~2022,~~2023, owned approximately ~~610,246~~610,261 shares of Ashford Inc. common stock, which represented an approximate ~~19.6%~~19.0% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc. Series D Convertible Preferred Stock, which, along with all unpaid accrued and accumulated dividends thereon, was ~~exercisable~~convertible (at ~~an exercise~~a conversion price of $117.50 per share) into an additional approximate ~~3,991,191~~4,151,054 shares of Ashford Inc. common stock, which if ~~exercised~~converted as of ~~September~~June 30, ~~2022~~ 2023

would have increased the Bennetts’ ownership interest in Ashford Inc. to ~~64.8% subject to applicable voting limitations;~~64.6%, provided that prior to August 8, 2023, the voting power of the holders of the Ashford Inc. Series D Convertible Preferred Stock is limited to 40% of the combined voting power of all of the outstanding voting securities of ~~the~~ Ashford Inc. entitled to vote on any given matter. The 18,758,600 shares of ~~Ashford Inc.~~ Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 360,000 shares owned by trusts.

As of ~~September~~June 30, ~~2022,~~2023, Mr. Monty J. Bennett, chairman of our board of directors and his father, Mr. Archie Bennett, Jr., together owned approximately ~~4,557,361~~3,059,526 shares of our common stock (including common units, long-term incentive plan (“LTIP”) units and performance LTIP units), which represented an approximate ~~5.7%~~4.2% ownership in the Company.

Recent Developments

On April ~~15, 2022, Ashford Inc. and Ashford Hospitality Services, LLC, a subsidiary of Ashford Inc. (“Ashford Services”), agreed with Jeremy Welter,~~4, 2023, the Chief Operating Officer of Ashford Inc., that, effective on July 15, 2022, Mr. Welter would terminate employment with and service to Ashford Inc., Ashford Services and their affiliates. Mr. Welter was alsoCompany amended the ~~Chief Operating Officer~~mortgage loan secured by The Ritz-Carlton Sarasota. Terms of the amendment replaced the variable interest rate of LIBOR + 2.65% with SOFR + 2.75%, extended the current maturity date to October 2023, and added one six-month extension option, subject to satisfaction of certain conditions. Effective June 1, 2023, the variable interest rate increased from SOFR + 2.75% to SOFR + 3.60% in accordance with the loan agreement. The Company paid Lismore approximately $98,000 for the successful execution of The Ritz-Carlton Sarasota loan modification and ~~accordingly his service as Chief Operating Officer~~extension.

On April 18, 2023, the Company amended the mortgage loan secured by Hotel Yountville. Terms of the amendment replaced the variable interest rate of LIBOR + 2.55% with SOFR + 2.65%, extended the current maturity date to November 2023, and added one six-month extension option, subject to satisfaction of certain conditions.

On June 13, 2023, the Company finalized an extension of its $435 million mortgage loan secured by four properties: The Notary Hotel, The Clancy, Sofitel Chicago Magnificent Mile, and Marriott Seattle Waterfront. The loan is being extended beyond its original initial maturity in June 2023 for an additional twelve months. In conjunction with the extension, the Company paid down $142 million of the loan utilizing corporate cash on hand, which reduced the balance to approximately $293 million. As part of the extension the Company also ~~ended~~purchased an interest rate cap through June 2024 with a strike rate of 4.69%.

Effective June 30, 2023, LIBOR is no longer published. Accordingly all variable interest rate mortgage loans held by the Company that used the LIBOR index transitioned to SOFR beginning on July ~~15, 2022.~~1, 2023. Not all lenders will execute loan amendment documents and instead will defer to original loan documents that dictate changes in index rates.

On ~~September 20, 2022,~~July 31, 2023, the Company ~~made an additional investment in OpenKey~~entered into a Credit Agreement (the “Credit Agreement”) with Braemar OP (the “Borrower”), the lenders party thereto (the “Lenders”) and Bank of ~~approximately $164,000.~~

~~In September 2022, given the recent increases~~America, N.A., as administrative agent and L/C Issuer (as defined in the ~~federal funds rate~~Credit Agreement). Bank of America, N.A. acted as administrative agent and ~~interest rates~~lead arranger on ~~short-term U.S. Treasury securities,~~ the ~~independent members~~transaction. Syndicate bank participants include TBK Bank and MidFirst Bank.

The Credit Agreement evidences a $200 million senior secured credit facility (the “Facility”) comprised of ~~our board~~a senior secured term loan facility of ~~directors approved the engagement~~$150 million (the “Term Loan Facility”) and a senior secured revolving credit facility of ~~our Advisor to actively manage and invest the Company’s excess cash in short-term U.S. Treasury securities~~ $50 million (the ~~“Cash Management Strategy”~~“Revolving Credit Facility”). ~~As consideration for~~Upon satisfaction of certain conditions, including the ~~Advisor’s services~~addition of new Borrowing Base Properties (as defined in the Credit Agreement), the Facility may be increased to a size of not more than $400 million in the aggregate. The maximum availability under ~~this engagement,~~ the ~~Company will pay the Advisor an annual fee equal~~Facility is determined on a quarterly basis and limited to the lesser of (i) $200 million (subject to increase of up to $400 million in the aggregate); (ii) 55% of the appraised value of all Borrowing Base Properties; and (iii) the DSC Amount (as defined below). The initial Borrowing Base Properties include the Company’s Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville hotel properties (the “Initial Borrowing Base Properties”). The “DSC Amount” means the maximum principal amount that can be supported from the Adjusted NOI (as defined in the Credit Agreement) from the Borrowing Base Properties assuming (i) a 30-year amortization and an interest rate which is the greater of (a) the ten (10) year U.S. Treasury Rate plus 2.50% and (b) 7.50%; and (ii) a minimum debt service coverage of 1.75 to 1.00.

Borrowings under the Credit Agreement will bear interest at Daily SOFR or Term SOFR plus 10 basis points (with a 0% floor) plus the applicable margin. Depending on the Company’s ~~excess cash invested by~~Net Debt to EBITDA ratio, the ~~Advisor~~applicable margin for SOFR ranges from 2.25% to 3.00%. Default interest would accrue at the applicable rate plus 2.0%.

Financial covenants are generally based on the financial condition and results of operations of the Company and its consolidated subsidiaries and include, among others, the following:

(i) a Consolidated Leverage Ratio (i.e., Consolidated Net Debt to the Consolidated Total Asset Value) of not more than 55%; and

The Credit Agreement includes customary events of default, and the ~~actual rate~~occurrence of ~~return realized by~~an event of default will permit the ~~Cash Management Strategy (the “Cash Management Fee”); provided that~~Lenders to terminate commitments to lend under the Credit Agreement and accelerate payments of all amounts outstanding thereunder.

On August 1, 2023 the Company announced the rebranding and planned conversion of its Mr. C Beverly Hills Hotel in ~~no event will the Cash Management Fee be less than zero. The Cash Management Fee will be calculated and payable monthly in arrears. Investment of the Company’s excess cash pursuant~~Los Angeles, California to the ~~Cash Management Strategy commenced in October 2022.~~

~~On October 31, 2022, the Company entered into a Purchase~~Cameo Beverly Hills. Effective August 4, 2023, Cameo Beverly Hills became available for booking on Hilton’s website at hilton.com and ~~Sale Agreement (the “Purchase Agreement~~”) to acquire a 100% interest in the 210-room Four Seasons Resort Scottsdale at Troon North for $267.8 million in cash. As required by the Purchase Agreement, the Company has deposited $26.8 million into escrow pending the closing or termination of the Purchase Agreement. The acquisitionjoined Hilton Honors, Hilton’s award-winning guest loyalty program. Following an extensive renovation, which is expected to ~~close~~be completed by ~~December 31, 2022, subject~~the end of 2025, the hotel will join LXR Hotels & Resorts (“LXR”). One of Hilton’s iconic luxury brands, LXR is a collection of unique, independent luxury properties around the world that focuses on individualized service and one-of-a-kind stays.

The conversion of the hotel, which was built in 1965, will reflect its unique history and distinctive location in the heart of West Los Angeles near iconic amenities and high-end shopping on Rodeo Drive. The Company is planning an approximately $25 million renovation to ~~certain customary closing conditions.~~further elevate this distinctive hotel that will enable a revitalized luxury guest experience when it is completed. Added amenities and enhanced design elements will include upgrades to the guestrooms, guest bathrooms, restaurant, lobby, pool, fitness area, and meeting spaces.

Remington Hospitality will continue to manage the hotel after the conversion under a management agreement.

On August 4, 2023, the board of directors of the Company approved amendments to the Company’s Fourth Amended and Restated Bylaws, as amended. See Part II, Item 5 for a description of the amendments.

Key Indicators of Operating Performance

We use a variety of operating and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include:

•Occupancy. Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of hotels in a given period.

•ADR. ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We use ADR to assess the pricing levels that we are able to generate.

•RevPAR. RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the

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leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.

RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs.

Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.

We also use funds from operations (“FFO”), Adjusted FFO, earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) and Adjusted EBITDAre as measures of the operating performance of our business. See “Non-GAAP Financial Measures.”

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RESULTS OF OPERATIONS

Three Months Ended ~~September~~June 30, ~~2022~~ 2023Compared to Three Months Ended ~~September~~June 30, ~~2021~~2022

The following table summarizes changes in key line items from our condensed consolidated statements of operations for ~~the~~ three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands except percentages):


		Three Months Ended September 30,				Favorable (Unfavorable)					Three Months Ended June 30,				Favorable (Unfavorable)
		2022		2021		$ Change		% Change			2023		2022		$ Change		% Change
Revenue	Revenue									Revenue
Rooms	Rooms	$	104,503	$	77,560	$	26,943	34.7	%	Rooms	$	117,137	$	112,527	$	4,610	4.1	%
Food and beverage	Food and beverage	37,624		24,494		13,130		53.6		Food and beverage	47,776		42,269		5,507		13.0

Other	Other	19,062		14,123		4,939		35.0		Other	21,794		20,098		1,696		8.4

Total revenue	Total revenue	161,189		116,177		45,012		38.7		Total revenue	186,707		174,894		11,813		6.8
Expenses	Expenses									Expenses
Hotel operating expenses:	Hotel operating expenses:									Hotel operating expenses:
Rooms	Rooms	25,424		17,072		(8,352)		(48.9)		Rooms	26,705		24,134		(2,571)		(10.7)
Food and beverage	Food and beverage	31,320		20,252		(11,068)		(54.7)		Food and beverage	36,365		31,894		(4,471)		(14.0)
Other expenses	Other expenses	50,836		36,124		(14,712)		(40.7)		Other expenses	56,297		52,087		(4,210)		(8.1)
Management fees	Management fees	5,116		3,595		(1,521)		(42.3)		Management fees	5,880		5,538		(342)		(6.2)
Total hotel operating expenses	Total hotel operating expenses	112,696		77,043		(35,653)		(46.3)		Total hotel operating expenses	125,247		113,653		(11,594)		(10.2)
Property taxes, insurance and other	Property taxes, insurance and other	8,851		12,622		3,771		29.9		Property taxes, insurance and other	9,396		5,277		(4,119)		(78.1)
Depreciation and amortization	Depreciation and amortization	19,604		18,284		(1,320)		(7.2)		Depreciation and amortization	22,567		19,571		(2,996)		(15.3)
Advisory services fee	Advisory services fee	8,854		4,809		(4,045)		(84.1)		Advisory services fee	8,215		6,305		(1,910)		(30.3)
(Gain) loss on legal settlements										(Gain) loss on legal settlements	—		(114)		(114)		(100.0)

Transaction costs		—		275		275		100.0
Corporate general and administrative	Corporate general and administrative	8,075		2,094		(5,981)		(285.6)		Corporate general and administrative	3,896		3,438		(458)		(13.3)
Total expenses	Total expenses	158,080		115,127		(42,953)		(37.3)		Total expenses	169,321		148,130		(21,191)		(14.3)

Operating income (loss)	Operating income (loss)	3,109		1,050		2,059		196.1		Operating income (loss)	17,386		26,764		(9,378)		(35.0)
Equity in earnings (loss) of unconsolidated entity	Equity in earnings (loss) of unconsolidated entity	(74)		(68)		(6)		(8.8)		Equity in earnings (loss) of unconsolidated entity	(75)		(74)		(1)		(1.4)
Interest income	Interest income	745		13		732		5,630.8		Interest income	2,295		162		2,133		1,316.7
Other income (expense)		27		—		27

Interest expense and amortization of loan costs	Interest expense and amortization of loan costs	(14,490)		(8,364)		(6,126)		(73.2)		Interest expense and amortization of loan costs	(23,600)		(10,281)		(13,319)		(129.5)
Write-off of loan costs and exit fees	Write-off of loan costs and exit fees	(8)		(432)		424		98.1		Write-off of loan costs and exit fees	(248)		(22)		(226)		(1,027.3)

Unrealized gain (loss) on derivatives		2,403		142		2,261		1,592.3
Realized and unrealized gain (loss) on derivatives										Realized and unrealized gain (loss) on derivatives	1,029		1,208		(179)		(14.8)
Income (loss) before income taxes	Income (loss) before income taxes	(8,288)		(7,659)		(629)		(8.2)		Income (loss) before income taxes	(3,213)		17,757		(20,970)		(118.1)
Income tax (expense) benefit	Income tax (expense) benefit	(95)		(560)		465		83.0		Income tax (expense) benefit	75		(1,077)		1,152		107.0
Net income (loss)	Net income (loss)	(8,383)		(8,219)		(164)		(2.0)		Net income (loss)	(3,138)		16,680		(19,818)		(118.8)
(Income) loss attributable to noncontrolling interest in consolidated entities	(Income) loss attributable to noncontrolling interest in consolidated entities	(823)		450		(1,273)		(282.9)		(Income) loss attributable to noncontrolling interest in consolidated entities	367		(1,468)		1,835		125.0
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	1,166		823		343		41.7		Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	925		(846)		1,771		209.3
Net income (loss) attributable to the Company	Net income (loss) attributable to the Company	$	(8,040)	$	(6,946)	$	(1,094)	(15.8)	%	Net income (loss) attributable to the Company	$	(1,846)	$	14,366	$	(16,212)	(112.8)	%

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All hotel properties owned for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended ~~September~~June 30, 2023 and 2022. The hotel property listed below is not a comparable hotel property for the periods indicated and all other hotel properties are considered comparable hotel properties. The following acquisition affects reporting comparability related to our condensed consolidated financial statements:

Hotel Property

Location

Type

Date

Four Seasons Resort Scottsdale

Scottsdale, Arizona

Acquisition

December 1, 2022

The following table illustrates the key performance indicators of all hotel properties owned for the periods indicated:


	Three Months Ended June 30,
	2023			2022
Occupancy	70.91		%	71.15		%
ADR (average daily rate)	$	430.68		$	435.24
RevPAR (revenue per available room)	$	305.39		$	309.68
Rooms revenue (in thousands)	$	117,137		$	112,527
Total hotel revenue (in thousands)	$	186,707		$	174,894

The following table illustrates the key performance indicators of the 15 hotel properties that were owned for the full three months ended June 30, 2023 and 2022:


	Three Months Ended June 30,
	2023			2022
Occupancy	72.08		%	71.15		%
ADR (average daily rate)	$	415.76		$	435.24
RevPAR (revenue per available room)	$	299.66		$	309.68
Rooms revenue (in thousands)	$	109,213		$	112,527
Total hotel revenue (in thousands)	$	171,471		$	174,894

Net Income (Loss) Attributable to the Company. Net income (loss) attributable to the Company changed $16.2 million, from net income of $14.4 million for the three months ended June 30, 2022 (the “2022 quarter”) to net a loss of $1.8 million for the three months ended June 30, 2023 (the “2023 quarter”), as a result of the factors discussed below.

Rooms Revenue. Rooms revenue increased $4.6 million, or 4.1%, to $117.1 million during the 2023 quarter compared to the 2022 quarter. During the 2023 quarter, we experienced a 24 basis point decrease in occupancy and ~~2021.~~a 1.0% decrease in room rates.

Fluctuations in rooms revenue between the 2023 quarter and the 2022 quarter are a result of the changes in occupancy and ADR between the 2023 quarter and the 2022 quarter as reflected in the table below (dollars in thousands):


Hotel Property	Favorable (Unfavorable)
	Rooms Revenue		Occupancy (change in bps)	ADR (change in %)
Comparable
Capital Hilton(1)	$	1,713	620	8.7	%
Marriott Seattle Waterfront (2)	2,606		2,162	4.0	%
The Notary Hotel	1,485		847	9.2	%
The Clancy	(1,536)		(396)	(11.3)	%
Sofitel Chicago Magnificent Mile	196		28	2.2	%
Pier House Resort & Spa	(1,111)		(323)	(12.0)	%
The Ritz-Carlton St. Thomas	(2,167)		(748)	(5.6)	%
Park Hyatt Beaver Creek Resort & Spa	(441)		(1,096)	5.3	%
Hotel Yountville	(1,055)		(277)	(20.9)	%
The Ritz-Carlton Sarasota(1)	(3,229)		(2,244)	0.8	%
Hilton La Jolla Torrey Pines	(396)		(317)	(1.5)	%
Bardessono Hotel and Spa	(938)		101	(17.6)	%
The Ritz-Carlton Lake Tahoe	729		778	2.6	%
Mr. C Beverly Hills Hotel	(113)		65	(4.1)	%
The Ritz-Carlton Reserve Dorado Beach	941		(169)	10.7	%
Total	$	(3,316)	93	(4.5)	%
Non-comparable
Four Seasons Resort Scottsdale	$	7,924	n/a	n/a

________

(1)This hotel was under renovation during the 2023 quarter.

(2)This hotel was under renovation during the 2022 quarter.

Food and Beverage Revenue. Food and beverage revenue increased $5.5 million, or 13.0%, to $47.8 million during the 2023 quarter compared to the 2022 quarter. This increase is attributable to an aggregate increase of $4.2 million at five comparable hotel properties and an increase of $5.3 million from the acquisition of the Four Seasons Resort Scottsdale on December 1, 2022. These increases were partially offset by an aggregate decrease of $3.9 million at The Clancy, Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, The Ritz-Carlton St. Thomas, Park Hyatt Beaver Creek Resort & Spa, Hotel Yountville, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, Bardessono Hotel and Spa and Mr. C Beverly Hills Hotel.

Other Hotel Revenue. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $1.7 million, or 8.4%, to $21.8 million during the 2023 quarter compared to the 2022 quarter. This increase is attributable to an aggregate increase in other hotel revenue of $1.3 million at ten comparable hotel properties and an increase of $2.0 million at the Four Seasons Resort Scottsdale, partially offset by an aggregate decrease of $1.6 million at the Capital Hilton, Pier House Resort & Spa, The Ritz-Carlton St. Thomas, The Ritz-Carlton Sarasota and Hilton La Jolla Torrey Pines.

Rooms Expense. Rooms expense increased $2.6 million, or 10.7%, to $26.7 million in the 2023 quarter compared to the 2022 quarter. This increase is primarily attributable to an aggregate increase of $1.9 million at eight comparable hotel properties and an increase of $1.9 million at the Four Seasons Resort Scottsdale, partially offset by a decrease of $1.2 million at the Pier House Resort & Spa, The Ritz-Carlton St. Thomas, Hotel Yountville, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, Bardessono Hotel and Spa and The Ritz-Carlton Reserve Dorado Beach.

Food and Beverage Expense. Food and beverage expense increased $4.5 million, or 14.0%, to $36.4 million during the 2023 quarter compared to the 2022 quarter. This increase is attributable to an aggregate increase of $2.1 million at seven comparable hotel properties and an increase of $3.7 million at the Four Seasons Resort Scottsdale, partially offset by a decrease of $1.4 million at the Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, Park Hyatt Beaver Creek Resort & Spa, Hotel Yountville, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, The Ritz-Carlton Lake Tahoe and Mr. C Beverly Hills Hotel.

Other Operating Expenses. Other operating expenses increased $4.2 million, or 8.1%, to $56.3 million in the 2023 quarter compared to the 2022 quarter. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees.

We experienced an increase of $710,000 in direct expenses and $3.5 million in indirect expenses and incentive management fees in the 2023 quarter as compared to the 2022 quarter. Direct expenses were 4.3% of total hotel revenue in the 2023 quarter and 4.2% in the 2022 quarter. The increase in direct expenses includes an increase of approximately $714,000 at the Four Seasons Resort Scottsdale.

The increase in indirect expenses comprises increases in: (i) general and administrative costs of $1.0 million comprising an increase $1.6 million at the one acquired hotel property offset by a decrease of $652,000 at our 15 comparable hotel properties; (ii) marketing costs of $2.3 million comprising an increase of $1.2 million at our 15 comparable hotel properties and $1.1 million at the one acquired hotel property; (iii) repairs and maintenance of $1.2 million, comprising an increase of $493,000 at our 15 comparable hotel properties and $664,000 at one acquired hotel property; and (iv) energy costs of $704,000 comprising an increase of $428,000 at our 15 comparable hotel properties and $276,000 at the one acquired hotel property. The increases were partially offset by decreases in (i) incentive management fees of $1.6 million comprising an aggregate decrease of $1.9 million from our 15 comparable hotel properties partially offset by an increase of $232,000 at the one acquired hotel property, and (ii) lease expense of $9,000 at our 15 comparable hotel properties.

Management Fees. Base management fees increased $342,000, or 6.2%, to $5.9 million in the 2023 quarter compared to the 2022 quarter. Base management fees increased $408,000 at five comparable hotel properties and $450,000 at the one acquired hotel property, partially offset by an aggregate decrease of $516,000 at the Sofitel Chicago Magnificent Mile, Hilton La Jolla Torrey Pines, Park Hyatt Beaver Creek Resort & Spa, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa, , Mr. C Beverly Hills Hotel, The Ritz-Carlton St. Thomas and The Ritz-Carlton Sarasota.

Property Taxes, Insurance and Other. Property taxes, insurance and other increased $4.1 million, or 78.1%, to $9.4 million in the 2023 quarter compared to the 2022 quarter. The increase is primarily attributable to an aggregate increase of approximately $3.9 million at 13 comparable hotel properties, including $2.3 million at the Sofitel Chicago Magnificent Mile and $249,000 at the one acquired hotel property. During the 2022 quarter, we received a real estate assessment reduction for the Sofitel Chicago Magnificent Mile. These increases were partially offset by an aggregate decrease of $27,000 at The Notary Hotel and The Ritz-Carlton St. Thomas.

Depreciation and Amortization. Depreciation and amortization increased $3.0 million, or 15.3%, to $22.6 million in the 2023 quarter compared to the 2022 quarter. The increase comprised $2.4 million at Four Seasons Resort Scottsdale as a result of its acquisition and an aggregate increase of $1.6 million at nine comparable hotel properties. These increases were partially offset by an aggregate decrease of $1.0 million at the Sofitel Chicago Magnificent Mile, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa and Mr. C Beverly Hills Hotel due to fully depreciated assets.

Advisory Services Fee. Advisory services fee increased $1.9 million, or 30.3%, to $8.2 million in the 2023 quarter compared to the 2022 quarter due to increases in the base advisory fee of $441,000, reimbursable expenses of $869,000, and incentive fee of $731,000 which was due to a credit in the 2022 quarter related to the reversal of the incentive fee, partially offset by a decrease of $131,000 in equity-based compensation.

In the 2023 quarter, we recorded an advisory services fee of $8.2 million, which included a base advisory fee of $3.7 million, reimbursable expenses of $2.0 million, $2.5 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

In the 2022 quarter, we recorded an advisory services fee of $6.3 million, which included a base advisory fee of $3.2 million, reimbursable expenses of $1.2 million, $2.6 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and a credit to incentive fee of $731,000.

Gain on Legal Settlements.During the 2022 quarter, the Company received an additional payment of approximately $114,000 related to accrued interest on the initial settlement amount associated with the City of San Francisco transfer tax matter. There was no such gain during the 2023 quarter.

Corporate General and Administrative. Corporate general and administrative expense was $3.9 million in the 2023 quarter and $3.4 million in the 2022 quarter. The increase in corporate general and administrative expense is due to higher reimbursed operating expenses of Ashford Securities of $361,000 and higher miscellaneous expenses of $413,000 partially offset by lower public company costs of $193,000 and lower professional fees of $123,000.

Equity in Earnings (Loss)of Unconsolidated Entity. In the 2023 quarter and 2022 quarter, we recorded equity in loss of unconsolidated entity of $75,000 and $74,000, respectively, related to our investment in OpenKey.

Interest Income. Interest income was $2.3 million and $162,000 in 2023 quarter and 2022 quarter, respectively. The increase in interest income in the 2023 quarter was primarily attributable to higher short-term interest rates on excess cash and the Company’s cash management agreement with Ashford LLC.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs increased $13.3 million, or 129.5%, to $23.6 million in the 2023 quarter compared to the 2022 quarter. This increase is primarily due to higher interest expense from higher average interest rates, as well as higher interest expense associated with the mortgage loan secured by the Four Seasons Resort Scottsdale as a result of its acquisition. The average LIBOR rates for the 2023 quarter and the 2022 quarter were 5.10% and 1.02%, respectively. The average SOFR rates for the 2023 quarter and the 2022 quarter were 4.74% and 0.67%, respectively.

Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees was $248,000 in the 2023 quarter, primarily related to various loan modifications. Write-off of loan costs and exit fees consisted of $137,000 from third parties and $111,000 from Lismore.

Write-off of loan costs and exit fees was $22,000 in the 2022 quarter, primarily related to third party costs from the acquisition of The Ritz-Carlton Reserve Dorado Beach.

Realized and Unrealized Gain (Loss) on Derivatives. Realized and unrealized gain on derivatives of $1.0 million for 2023 quarter consisted of an unrealized gain on warrants of approximately $16,000 and a realized gain of $2.3 million associated with payments received from counterparties on in-the-money interest rate caps. These gains were partially offset by an unrealized loss on interest rate caps of approximately $1.3 million.

Realized and unrealized gain on derivatives of $1.2 million in the 2022 quarter consisted of an unrealized gain of approximately $1.2 million on warrants and approximately $43,000 on interest rate caps.

Income Tax (Expense) Benefit. Income tax (expense) benefit changed $1.2 million, from expense of $1.1 million in the 2022 quarter to a benefit of $75,000 in the 2023 quarter. This change was primarily due to a decrease in the taxable income of certain of our TRS entities in the 2023 quarter compared to the 2022 quarter.

(Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities.Our noncontrolling interest partner in consolidated entities was allocated a loss of $367,000 and income of $1.5 million in the 2023 quarter and the 2022 quarter, respectively. At both June 30, 2023 and 2022, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated a net loss of $925,000 and net income of $846,000 in the 2023 quarter and the 2022 quarter, respectively. Redeemable noncontrolling interests in Braemar OP represented ownership interests of 6.63% and 7.59% as of June 30, 2023 and 2022, respectively.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 (in thousands except percentages):


	Six Months Ended June 30,				Favorable (Unfavorable)
	2023		2022		$ Change		% Change
Revenue
Rooms	$	254,664	$	217,719	$	36,945	17.0	%
Food and beverage	100,004		78,976		21,028		26.6

Other	47,340		40,079		7,261		18.1
Total hotel revenue	402,008		336,774		65,234		19.4


Expenses
Hotel operating expenses:
Rooms	54,063		44,318		(9,745)		(22.0)
Food and beverage	76,104		59,922		(16,182)		(27.0)
Other expenses	118,592		98,294		(20,298)		(20.7)
Management fees	12,585		9,686		(2,899)		(29.9)
Total hotel operating expenses	261,344		212,220		(49,124)		(23.1)
Property taxes, insurance and other	17,512		13,880		(3,632)		(26.2)
Depreciation and amortization	45,088		38,012		(7,076)		(18.6)
Advisory services fee	16,163		13,627		(2,536)		(18.6)
(Gain) loss on legal settlements	—		(114)		(114)		(100.0)


Corporate general and administrative	6,716		5,933		(783)		(13.2)
Total expenses	346,823		283,558		(63,265)		(22.3)

Operating income (loss)	55,185		53,216		1,969		3.7
Equity in earnings (loss) of unconsolidated entity	(148)		(146)		(2)		(1.4)
Interest income	4,403		187		4,216		2,254.5

Interest expense and amortization of discounts and loan costs	(46,473)		(18,803)		(27,670)		(147.2)
Write-off of loan costs and exit fees	(260)		(98)		(162)		(165.3)

Gain (loss) on extinguishment of debt	2,318		—		2,318
Realized and unrealized gain (loss) on derivatives	695		1,616		(921)		(57.0)
Income (loss) before income taxes	15,720		35,972		(20,252)		(56.3)
Income tax (expense) benefit	(2,254)		(3,688)		1,434		38.9
Net income (loss)	13,466		32,284		(18,818)		(58.3)
(Income) loss attributable to noncontrolling interest in consolidated entities	58		(1,442)		1,500		104.0
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	664		(1,813)		2,477		136.6
Net income (loss) attributable to the Company	$	14,188	$	29,029	$	(14,841)	(51.1)	%

All hotel properties owned for the six months ended June 30, 2023 and 2022 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of operating results for certain hotel properties are not comparable for the six months ended June 30, 2023 and 2022. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following acquisitions affect reporting comparability related to our condensed consolidated financial statements:

Hotel ~~Properties~~Property

Location

Type

Date

~~Mr. C Beverly Hills Hotel~~

~~Los Angeles, CA~~

~~Acquisition~~

~~August 5, 2021~~

The Ritz-Carlton Reserve Dorado Beach

Dorado, Puerto Rico

Acquisition

March 11, 2022

Four Seasons Resort Scottsdale

Scottsdale, Arizona

Acquisition

December 1, 2022

The following table illustrates the key performance indicators of all hotel properties owned for the periods indicated:


		Three Months Ended September 30,							Six Months Ended June 30,
		2022			2021				2023			2022
Occupancy	Occupancy	71.50		%	61.64		%	Occupancy	67.90		%	63.18		%
ADR (average daily rate)	ADR (average daily rate)	$	398.16		$	357.99		ADR (average daily rate)	$	491.69		$	481.70
RevPAR (revenue per available room)	RevPAR (revenue per available room)	$	284.69		$	220.66		RevPAR (revenue per available room)	$	333.84		$	304.32
Rooms revenue (in thousands)	Rooms revenue (in thousands)	$	104,503		$	77,560		Rooms revenue (in thousands)	$	254,664		$	217,719
Total hotel revenue (in thousands)	Total hotel revenue (in thousands)	$	161,189		$	116,177		Total hotel revenue (in thousands)	$	402,008		$	336,774

The following table illustrates the key performance indicators of the 1314 hotel properties that were ~~included~~owned for the full ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,							Six Months Ended June 30,
		2022			2021				2023			2022
Occupancy	Occupancy	71.79		%	61.81		%	Occupancy	69.02		%	61.05		%
ADR (average daily rate)	ADR (average daily rate)	$	375.77		$	358.25		ADR (average daily rate)	$	419.48		$	451.18
RevPAR (revenue per available room)	RevPAR (revenue per available room)	$	269.76		$	221.43		RevPAR (revenue per available room)	$	289.51		$	284.72
Rooms revenue (in thousands)	Rooms revenue (in thousands)	$	92,842		$	76,027		Rooms revenue (in thousands)	$	204,283		$	200,316
Total hotel revenue (in thousands)	Total hotel revenue (in thousands)	$	141,965		$	113,905		Total hotel revenue (in thousands)	$	319,022		$	309,743

Net Income (Loss) Attributable to the Company. Net ~~loss~~income attributable to the Company ~~increased $1.1~~decreased $14.8 million, from ~~a net loss of $6.9~~$29.0 million for the ~~three~~six months ended ~~September 30, 2021 (the “2021 quarter”) to $8.0 million for the three months ended September~~June 30, 2022 (the “2022 ~~quarter”~~period”), to $14.2 million for the six months ended June 30, 2023 (the “2023 period”), as a result of the factors discussed below.

Rooms Revenue. Rooms revenue increased ~~$26.9~~$36.9 million, or ~~34.7%~~17.0%, to ~~$104.5~~$254.7 million during the ~~2022 quarter~~2023 period compared to the ~~2021 quarter.~~2022 period. During the ~~2022 quarter,~~2023 period, we experienced a ~~986~~472 basis point increase in occupancy and a ~~11.2%~~2.1% increase in room ~~rates. The increase in rooms revenue is primarily due~~rates compared to the hotel properties recovering from the COVID-19 pandemic as well as increases of $1.9 million and $8.2 million associated with the acquisitions of the Mr. C Beverly Hills Hotel on August 5, 2021 and The Ritz-Carlton Reserve Dorado Beach on March 11, 2022 ~~respectively.~~period.

4043

~~Table of Contents~~

Fluctuations in rooms revenue between the ~~2022 quarter~~2023 period and the ~~2021 quarter~~2022 period are a result of the changes in occupancy and ADR between the ~~2022 quarter~~2023 period and the ~~2021 quarter~~2022 period as reflected in the table below (dollars in thousands):


Hotel Property	Hotel Property	Favorable (Unfavorable)					Hotel Property	Favorable (Unfavorable)
		Rooms Revenue		Occupancy (change in bps)	ADR (change in %)			Rooms Revenue		Occupancy (change in bps)	ADR (change in %)
Comparable	Comparable						Comparable
Capital Hilton(1)	Capital Hilton(1)	$	5,269	4,080	38.0	%	Capital Hilton(1)	$	6,610	1,951	10.8	%
Marriott Seattle Waterfront ~~(1)~~(2)	Marriott Seattle Waterfront ~~(1)~~(2)	1,333		(1,140)	39.3	%	Marriott Seattle Waterfront ~~(1)~~(2)	4,239		1,930	6.9	%
The Notary Hotel	The Notary Hotel	2,113		1,361	18.7	%	The Notary Hotel	2,929		1,014	9.7	%
The Clancy	The Clancy	4,476		751	69.3	%	The Clancy	1,979		332	8.2	%
Sofitel Chicago Magnificent Mile	Sofitel Chicago Magnificent Mile	2,932		1,470	26.1	%	Sofitel Chicago Magnificent Mile	1,003		550	0.4	%
Pier House Resort & Spa	Pier House Resort & Spa	(476)		(237)	(5.3)	%	Pier House Resort & Spa	(2,464)		(422)	(10.4)	%
The Ritz-Carlton St. Thomas	The Ritz-Carlton St. Thomas	(1,715)		(594)	(6.7)	%	The Ritz-Carlton St. Thomas	(5,050)		(733)	(6.3)	%
Park Hyatt Beaver Creek Resort & Spa	Park Hyatt Beaver Creek Resort & Spa	90		(547)	10.4	%	Park Hyatt Beaver Creek Resort & Spa	1,724		(365)	17.5	%
Hotel Yountville	Hotel Yountville	(196)		(905)	9.9	%	Hotel Yountville	(1,134)		343	(22.9)	%
The Ritz-Carlton Sarasota(1)	The Ritz-Carlton Sarasota(1)	219		33	(0.4)	%	The Ritz-Carlton Sarasota(1)	(5,311)		(1,267)	(3.9)	%
Hilton La Jolla Torrey Pines	Hilton La Jolla Torrey Pines	2,761		1,384	21.8	%	Hilton La Jolla Torrey Pines	1,008		272	4.1	%
Bardessono Hotel and Spa	Bardessono Hotel and Spa	(1,012)		(1,386)	2.0	%	Bardessono Hotel and Spa	(1,771)		(354)	(14.6)	%
The Ritz-Carlton Lake Tahoe	The Ritz-Carlton Lake Tahoe	1,021		851	1.8	%	The Ritz-Carlton Lake Tahoe	407		491	(6.3)	%
Mr. C Beverly Hills Hotel							Mr. C Beverly Hills Hotel	(202)		496	(9.2)	%
Total	Total	$	16,815	998	4.9	%	Total	$	3,967	797	(7.0)	%
Non-comparable	Non-comparable						Non-comparable
Mr. C Beverly Hills Hotel		$	1,938	2,128	0.8	%
The Ritz-Carlton Reserve Dorado Beach	The Ritz-Carlton Reserve Dorado Beach	8,190		n/a	n/a		The Ritz-Carlton Reserve Dorado Beach	$	10,896	n/a	n/a
Four Seasons Resort Scottsdale							Four Seasons Resort Scottsdale	22,081		n/a	n/a
Total	Total	$	10,128				Total	$	32,977

________

(1)This hotel was under renovation during the 2023 period.

(2)This hotel was under renovation during the 2022 ~~quarter.~~period.

Food and Beverage Revenue. Food and beverage revenue increased ~~$13.1~~$21.0 million, or ~~53.6%~~26.6%, to ~~$37.6~~$100.0 million during the ~~2022 quarter~~2023 period compared to the ~~2021 quarter. This increase is attributable to~~2022 period. We experienced an aggregate increase in food and beverage revenue of $8.1 million at ~~ten~~six comparable hotel properties ~~of $9.3 million as they are recovering from the COVID-19 pandemic,~~ as well as ~~an increase~~increases of ~~$536,000 resulting from the acquisition of the Mr. C Beverly Hills Hotel on August 5, 2021~~$4.1 million and ~~$3.7~~$11.8 million ~~with the acquisition of~~at The Ritz-Carlton Reserve Dorado Beach ~~on March 11, 2022,~~and the Four Seasons Resort Scottsdale, respectively. These increases were partially offset by an aggregate decrease of ~~$398,000~~approximately $2.9 million at The Ritz-Carlton St. Thomas, ~~Hotel Yountville and~~The Ritz-Carlton Sarasota, Pier House Resort & Spa, Bardessono Hotel and ~~Spa.~~Spa, Hotel Yountville, Sofitel Chicago Magnificent Mile, Park Hyatt Beaver Creek Resort & Spa and Mr. C Beverly Hills Hotel.

Other Hotel Revenue. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, ~~and business interruption revenue,~~ increased ~~$4.9~~$7.3 million, or ~~35.0%~~18.1%, to ~~$19.1~~$47.3 million during the ~~2022 quarter~~2023 period compared to the ~~2021 quarter.~~2022 period.

This increase is attributable to higher other hotel revenue of $1.9 million at nine comparable hotel properties, $2.4 million at The Ritz-Carlton Reserve Dorado Beach and $4.7 million at the Four Seasons Resort Scottsdale. These increases were partially offset by an aggregate decrease of approximately $1.7 million at The Ritz-Carlton St. Thomas, The Ritz-Carlton Sarasota, Pier House Resort & Spa, Park Hyatt Beaver Creek Resort & Spa and Capital Hilton.

Rooms Expense. Rooms expense increased $9.7 million, or 22.0%, to $54.1 million in the 2023 period compared to the 2022 period. This increase is attributable to an aggregate increase in ~~other hotel revenue~~rooms expense of ~~$2.5~~$5.1 million at 11nine comparable hotel properties, ~~and increases~~an increase of ~~$166,000 and $2.5~~$1.6 million at ~~the Mr. C Beverly Hills Hotel and~~ The Ritz-Carlton Reserve Dorado Beach ~~respectively,~~and an increase of $4.2 million at the Four Seasons Resort Scottsdale. These increases were partially offset by an aggregate decrease of ~~$197,000 at the Marriott Seattle Waterfront and Park Hyatt Beaver Creek Resort & Spa.~~

~~Rooms Expense~~. ~~Rooms expense increased $8.4~~approximately $1.1 million or 48.9%, to $25.4 million in the 2022 quarter compared to the 2021 quarter. This increase is primarily attributable to an aggregate increase of $5.6 million at 11 comparable hotel properties as they are recovering from the COVID-19 pandemic and increases of $601,000 and $2.5 million at the Mr. C Beverly Hills Hotel and The Ritz-Carlton Reserve Dorado Beach, respectively, partially offset by a decrease of $270,000 at The Ritz-Carlton St. Thomas, ~~and~~The Ritz-Carlton Sarasota, Pier House Resort & Spa, Bardessono Hotel and ~~Spa.~~Spa and Hotel Yountville.

Food and Beverage Expense. Food and beverage expense increased ~~$11.1~~$16.2 million, or ~~54.7%~~27.0%, to ~~$31.3~~$76.1 million during the ~~2022 quarter~~2023 period compared to the ~~2021 quarter.~~2022 period. This increase is attributable to ~~an aggregate increase~~higher food and beverage expense of ~~$6.9~~$5.4 million at ~~ten~~eight comparable hotel properties, ~~and an increase of $615,000 and~~ $3.7 million at ~~the Mr. C Beverly Hills Hotel and~~ The Ritz-Carlton Reserve Dorado Beach ~~respectively,~~and $8.4 million at the Four Seasons Resort Scottsdale. These increases were partially offset by aan aggregate decrease of ~~$158,000~~approximately $1.3 million at The Ritz-Carlton St. Thomas, The Ritz-Carlton Lake Tahoe, Pier House Resort & Spa, Hotel Yountville, Park Hyatt Beaver Creek Resort & Spa and ~~Bardessono Hotel and Spa.~~Mr. C Beverly Hills Hotel.

Other Operating Expenses. Other operating expenses increased ~~$14.7~~$20.3 million, or ~~40.7%~~20.7%, to ~~$50.8~~$118.6 million in the ~~2022 quarter~~2023 period compared to the ~~2021 quarter.~~2022 period. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees.

~~Table of Contents~~

We experienced an increase of ~~$1.7~~$2.9 million in direct expenses and ~~$13.0~~$17.4 million in indirect expenses and incentive management fees in the ~~2022 quarter as~~2023 period compared to the ~~2021 quarter as the hotel properties are recovering from the COVID-19 pandemic.~~ 2022 period.

Direct expenses were ~~4.2%~~4.3% of total hotel revenue in the ~~2022 quarter~~2023 period and ~~4.4%~~4.2% in the ~~2021 quarter.~~2022 period. The increase in direct expenses is ~~primarily attributable to~~associated with higher ~~occupancy levels~~direct expenses of approximately $732,000 at ~~all of our~~nine comparable hotel properties, ~~as they are recovering from the COVID-19 pandemic and an increase of approximately $1,000 and $1.4~~$1.3 million at The Ritz-Carlton Reserve Dorado Beach and $1.5 million at the Four Seasons Resort Scottsdale. These increases were partially offset by lower direct expenses of $616,000 at the Sofitel Chicago Magnificent Mile, Marriott Seattle Waterfront, Mr. C Beverly Hills Hotel, The Ritz-Carlton St. Thomas and The Ritz-Carlton ~~Reserve Dorado Beach, respectively.~~Sarasota.

The increase in indirect expenses ~~comprises~~is attributable to increases ~~in:~~in (i) general and administrative costs of ~~$5.6~~$6.8 million comprising an increase of ~~$3.1~~$2.0 million at our 1314 comparable hotel properties and ~~$2.5~~$4.8 million at the two acquired hotel properties; (ii) marketing costs of ~~$3.5~~$6.6 million comprising an increase of ~~$2.5~~$3.3 million at our 1314 comparable hotel properties and ~~$1.0~~$3.3 million at the two acquired hotel properties; (iii) repairs and maintenance of ~~$1.7~~$2.6 million comprising an increase of ~~$594,000~~$544,000 at our 1314 comparable hotel properties and ~~$1.2~~$2.1 million at the two acquired hotel properties; (iv) lease expense of ~~$424,000~~$158,000 comprising an increase of ~~$341,000~~$147,000 at our 1314 comparable hotel properties and ~~$83,000~~$11,000 at the two acquired hotel properties; and (v) energy costs of ~~$2.0~~$2.3 million ~~comprising~~comprised of an increase of ~~$962,000~~$960,000 at our 1314 comparable hotel properties and ~~$1.0~~$1.4 million at our two acquired hotel properties. These increases in indirect expenses were partially offset by an aggregate decrease of $1.1 million in incentive management fees, comprising of an aggregate decrease of $2.7 million at our 14 comparable hotel properties, offset by an aggregate increase of $1.5 million at the two acquired hotel properties. ~~The increases are partially offset by decreases in incentive management fees of $183,000.~~

Management Fees. Base management fees increased ~~$1.5~~$2.9 million, or ~~42.3%~~29.9%, to ~~$5.1~~$12.6 million in the ~~2022 quarter~~2023 period compared to the ~~2021 quarter. Base management~~2022 period. Management fees increased ~~$1.1~~$1.9 million at ~~nine~~seven comparable hotel properties, $537,000 at The Ritz-Carlton Reserve Dorado Beach and ~~$525,000~~$1.2 million at the ~~two acquired hotel properties,~~Four Seasons Resort Scottsdale. These increases were partially offset by an aggregate decrease of ~~$101,000~~$683,000 at the Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa, Mr. C Beverly Hills Hotel, ~~Yountville~~The Ritz-Carlton St. Thomas, The Ritz-Carlton Sarasota and The Ritz-Carlton ~~St. Thomas.~~Lake Tahoe.

Property Taxes, Insurance and Other. Property taxes, insurance and other ~~decreased $3.8~~increased $3.6 million, or ~~29.9%~~26.2%, to ~~$8.9~~$17.5 million in the ~~2022 quarter~~2023 period compared to the ~~2021 quarter. The decrease~~2022 period. This increase is ~~mainly composed of~~primarily attributable to an aggregate ~~decrease~~increase of ~~approximately $5.3~~$2.6 million at ~~four~~twelve comparable hotel properties, including ~~a $2.9 million and $2.2 million decrease~~$36,000 at the Sofitel Chicago Magnificent Mile, and Marriott Seattle Waterfront, respectively, due to lower property tax assessments. The decrease is partially offset by an aggregate increase of $812,000 at nine comparable hotel properties as well as increases of $126,000 at the Mr. C Beverly Hills Hotel and $636,000$590,000 at The Ritz-Carlton Reserve Dorado Beach ~~as a result~~and $506,000 at the Four Seasons Resort Scottsdale. These increases were partially offset by an aggregate decrease of ~~their acquisitions.~~approximately $94,000 at The Notary Hotel and The Ritz-Carlton St. Thomas.

Depreciation and Amortization. Depreciation and amortization increased ~~$1.3~~$7.1 million, or ~~7.2%~~18.6%, to ~~$19.6~~$45.1 million infor the ~~2022 quarter~~2023 period compared to the ~~2021 quarter. The~~2022 period. This increase is comprised ~~$240,000 at the Mr. C Beverly Hills Hotel and $1.6~~of $1.4 million at The Ritz-Carlton Reserve Dorado Beach, ~~as a result of their acquisitions~~$4.7 million at the Four Seasons Resort Scottsdale and an aggregate increase of ~~$751,000~~$3.3 million at ~~Capital Hilton, Park Hyatt Beaver Creek Resort & Spa, Marriott Seattle Waterfront, The Ritz-Carlton St. Thomas and The Ritz-Carlton Lake Tahoe.~~eight comparable hotel properties. These increases were partially offset by an aggregate decrease of ~~$1.3~~$2.3 million at ~~eight comparable hotel properties~~the Sofitel Chicago Magnificent Mile, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa and Mr. C Beverly Hills Hotel primarily due to fully depreciated assets.

Advisory Services Fee. Advisory services fee increased ~~$4.0~~$2.5 million, or ~~84.1%~~18.6%, to ~~$8.9~~$16.2 million in the ~~2022 quarter~~2023 period compared to the ~~2021 quarter~~2022 period due to increases in the base advisory fee of ~~$511,000,~~$1.1 million, reimbursable expenses of ~~$497,000,~~$1.8 million, partially offset by decreases in equity-based compensation of ~~$352,000,~~$155,000 and incentive fee of ~~$2.7 million.~~$246,000.

In the ~~2022 quarter,~~2023 period, we recorded an advisory services fee of ~~$8.9~~$16.2 million, which included a base advisory fee of ~~$3.3~~$7.3 million, reimbursable expenses of ~~$1.2~~$4.1 million ~~$3.3~~and $4.8 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

In the 2022 period, we recorded an advisory services fee of $13.6 million, which included a base advisory fee of $6.2 million, reimbursable expenses of $2.3 million, $4.9 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and an incentive fee of ~~$1.0 million.~~

In the 2021 quarter, we recorded an advisory services fee of $4.8 million, which included a base advisory fee of $2.8 million, reimbursable expenses of $694,000, $3.0 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and a credit to incentive fee of $1.6 million.$246,000.

~~Transaction Costs.~~Gain on Legal Settlements. InDuring the ~~2021 quarter, we recognized transactions costs~~2022 period, the Company received an additional payment of ~~$275,000~~approximately $114,000 related to accrued interest on the initial settlement amount associated with the ~~acquisition~~City of San Francisco transfer tax matter. There was no such gain during the ~~Mr. C Beverly Hills Hotel. There were no transaction costs in the 2022 quarter.~~2023 period.

Corporate General and Administrative. Corporate general and administrative expense was ~~$8.1~~$6.7 million in the 2023 period compared to $5.9 million in the 2022 ~~quarter and $2.1 million in the 2021 quarter.~~period. The increase in corporate general and administrative ~~expense~~expenses is primarily due to ~~higher professional fees of $632,000,~~

higher reimbursed operating expenses of Ashford Securities of ~~$4.9~~$1.0 million and higher miscellaneous expenses of ~~$530,000,~~$382,000, partially offset by ~~a decrease~~lower professional fees of ~~$60,000 in~~$221,000 and lower public company ~~costs. During the third quarter~~costs of 2022, the funding estimate to Ashford Securities was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities that resulted in additional expense of approximately $5.2 million.$406,000.

Equity in Earnings (Loss) of Unconsolidated Entity. In the 2023 period and the 2022 ~~quarter and 2021 quarter,~~period, we recorded equity in loss of unconsolidated entity of ~~$74,000~~$148,000 and ~~$68,000,~~$146,000, respectively, related to our investment in OpenKey.

~~Table of Contents~~

Interest Income. Interest income was ~~$745,000~~$4.4 million and ~~$13,000~~$187,000 in the 2023 period and the 2022 ~~quarter and 2021 quarter,~~period, respectively. The increase in interest income in the 2023 period was primarily ~~related~~attributable to ~~bank account interest resulting from~~ higher ~~cash balances and higher~~short-term interest rates inon excess cash and the ~~2022 quarter compared to the 2021 quarter.~~

~~Other Income (Expense).~~ ~~Other income was $27,000 in the 2022 quarter compared to $0 in the 2021 quarter. In 2022 quarter, we recorded income of $27,000 related to payments from counterparties on interest rate caps.~~Company’s cash management agreement with Ashford LLC.

Interest Expense and Amortization of Discounts and Loan Costs.Interest expense and amortization of discounts and loan costs increased ~~$6.1~~$27.7 million, or ~~73.2%~~147.2%, to ~~$14.5~~$46.5 million infor the ~~2022 quarter~~2023 period compared to the ~~2021 quarter.~~2022 period. The increase is primarily due to higher interest expense from a higher average ~~LIBOR rate, as well as higher~~ interest ~~expense from our Convertible Senior Notes~~rates and the mortgage ~~loans associated with~~loan secured by the ~~Mr. C Beverly Hills Hotel and The Ritz-Carlton Reserve Dorado Beach acquisitions.~~Four Seasons Resort Scottsdale as a result of its acquisition. The average LIBOR rates infor the 2023 period and the 2022 ~~quarter~~period were 4.85% and 0.62%, respectively. The average SOFR rates for the 2023 period and the ~~2021 quarter~~2022 period were ~~2.47%~~4.62% and ~~0.09%~~0.39%, respectively.

Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees was ~~$8,000~~$260,000 in the ~~2022 quarter, primarily~~2023 period related to ~~the mortgage~~various loan ~~extension~~modifications. Write-off of ~~The Ritz-Carlton St. Thomas.~~loan costs and exit fees consisted of $149,000 from third parties and $111,000 from Lismore.

Write-off of loan costs and exit fees was ~~$432,000~~$98,000 in the ~~2021 quarter,~~2022 period primarily ~~associated with~~resulting from third party cost from the ~~$419,000 write-off~~refinance of ~~loan costs~~the Park Hyatt Beaver Creek Resort & Spa in February 2022.

Gain (loss) on Extinguishment of Debt. Gain on extinguishment of debt was $2.3 million in the 2023 period due to the payoff of The Ritz-Carlton Reserve Dorado Beach mortgage loan. The gain was primarily attributable to the premium that was recorded upon the ~~$20 million pay-down~~assumption of the mortgage loan ~~assumed with~~when the ~~Mr. C Beverly Hills Hotel acquisition.~~hotel was acquired. There was no such gain or loss in the 2022 period.

Realized and Unrealized Gain (Loss) on Derivatives. Realized and unrealized gain on derivatives of $695,000 for the 2023 period consisted of unrealized gain on warrants of $119,000 and a realized gain of $4.1 million associated with payments received from counterparties on in-the-money interest rate caps. These gains were partially offset by an unrealized loss on interest rate caps of approximately $3.6 million.

Unrealized gain on derivatives of ~~$2.4~~$1.6 million infor the 2022 ~~quarter~~period consisted of an unrealized gain of approximately ~~$265,000 on warrants and approximately $2.1 million~~$886,000 on interest rate ~~caps.~~

~~Unrealized gain~~caps, and approximately $730,000 on derivatives of $142,000 in the 2021 quarter consisted of an unrealized gain of approximately $190,000 on warrants, partially offset by an unrealized loss of approximately $48,000 on interest rate caps.warrants.

Income Tax (Expense) Benefit.Income tax expense decreased ~~$465,000,~~$1.4 million, from ~~$560,000 in the 2021 quarter to $95,000~~$3.7 million in the 2022 ~~quarter.~~period to $2.3 million in the 2023 period. This decrease was primarily due to ~~the~~a decrease in the ~~profitability~~taxable income of certain of our TRS entities in the ~~2022 quarter~~2023 period compared to the ~~2021 quarter.~~2022 period.

(Income) Loss Attributable to Noncontrolling Interest in Consolidated ~~Entities.~~Entities. Our noncontrolling interest partner in consolidated entities was allocated ~~income of $823,000 and~~ a loss of ~~$450,000~~$58,000 and income of $1.4 million in the ~~2022 quarter~~2023 period and the ~~2021 quarter,~~2022 period, respectively. At both ~~September~~June 30, ~~2022~~2023 and ~~2020,~~2022, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net loss of ~~$1.2 million and $823,000~~$664,000 in the ~~2022 quarter~~2023 period and ~~the 2021 quarter, respectively. Redeemable noncontrolling interests in Braemar OP represented ownership interests of 7.66% and 8.35% as of September 30, 2022 and 2021, respectively.~~

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~~Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021~~

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the nine months ended September 30, 2022 and 2021 (in thousands except percentages):

Nine Months Ended September 30, Favorable (Unfavorable)
2022 2021 $ Change % Change
Revenue
Rooms $ 322,222 $ 195,720 $ 126,502 64.6 %
Food and beverage 116,600 60,976 55,624 91.2
Other 59,141 40,439 18,702 46.2
Total hotel revenue 497,963 297,135 200,828 67.6
Expenses
Hotel operating expenses:
Rooms 69,742 41,569 (28,173) (67.8)
Food and beverage 91,242 50,526 (40,716) (80.6)
Other expenses 149,130 98,143 (50,987) (52.0)
Management fees 14,802 9,079 (5,723) (63.0)
Total hotel operating expenses 324,916 199,317 (125,599) (63.0)
Property taxes, insurance and other 22,731 27,076 4,345 16.0
Depreciation and amortization 57,616 54,881 (2,735) (5.0)
Advisory services fee 22,481 16,343 (6,138) (37.6)
(Gain) loss on legal settlements (114) (989) (875) (88.5)
Transaction costs — 571 571 100.0
Corporate general and administrative 14,008 6,077 (7,931) (130.5)
Total expenses 441,638 303,276 (138,362) (45.6)
Gain (loss) on insurance settlement and disposition of assets — 696 (696) (100.0)
Operating income (loss) 56,325 (5,445) 61,770 1,134.4
Equity in earnings (loss) of unconsolidated entity (220) (198) (22) (11.1)
Interest income 932 34 898 2,641.2
Other income (expense) 27 — 27
Interest expense and amortization of discounts and loan costs (33,293) (22,346) (10,947) (49.0)
Write-off of loan costs and exit fees (106) (1,960) 1,854 94.6
Unrealized gain (loss) on derivatives 4,019 64 3,955 6,179.7
Income (loss) before income taxes 27,684 (29,851) 57,535 192.7
Income tax (expense) benefit (3,783) (766) (3,017) (393.9)
Net income (loss) 23,901 (30,617) 54,518 178.1
(Income) loss attributable to noncontrolling interest in consolidated entities (2,265) 2,546 (4,811) (189.0)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership (647) 3,184 (3,831) (120.3)
Net income (loss) attributable to the Company $ 20,989 $ (24,887) $ 45,876 184.3 %

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All hotel properties owned for the nine months ended September 30, 2022 and 2021 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the nine months ended September 30, 2022 and 2021. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following acquisitions affect reporting comparability related to our condensed consolidated financial statements:

~~Hotel Properties~~

~~Location~~

~~Type~~

~~Date~~

~~Mr. C Beverly Hills Hotel~~

~~Los Angeles, California~~

~~Acquisition~~

~~August 5, 2021~~

~~The Ritz-Carlton Reserve Dorado Beach~~

~~Dorado, Puerto Rico~~

~~Acquisition~~

~~March 11, 2022~~

~~The following table illustrates the key performance indicators of all hotel properties for the periods indicated:~~

Nine Months Ended September 30,
2022 2021
Occupancy 66.00 % 49.46 %
ADR (average daily rate) $ 451.01 $ 385.28
RevPAR (revenue per available room) $ 297.66 $ 190.58
Rooms revenue (in thousands) $ 322,222 $ 195,720
Total hotel revenue (in thousands) $ 497,963 $ 297,135

~~The following table illustrates the key performance indicators of the 13 hotel properties that were included for the full nine months ended September 30, 2022 and 2021:~~

Nine Months Ended September 30,
2022 2021
Occupancy 65.79 % 49.42 %
ADR (average daily rate) $ 426.10 $ 385.63
RevPAR (revenue per available room) $ 280.33 $ 190.60
Rooms revenue (in thousands) $ 286,455 $ 194,187
Total hotel revenue (in thousands) $ 441,791 $ 294,863

~~Net Income (Loss) Attributable to the Company.~~ ~~Net income (loss) attributable to the Company changed $45.9 million, from a net loss of $24.9 million for the nine months ended September 30, 2021 (the “2021 period”), to~~ net income of ~~$21.0 million for the nine months ended September 30, 2022 (the “2022 period”), as a result of the factors discussed below.~~

~~Rooms Revenue~~. Rooms revenue increased $126.5 million, or 64.6%, to $322.2 million during the 2022 period compared to the 2021 period. During the 2022 period, we experienced a 1,654 basis point increase in occupancy and a 17.1% increase in room rates compared to the 2021 period. The increase in rooms revenue is due to the hotel properties recovering from the COVID-19 pandemic as well as an increase of $8.6 million associated with the acquisition of the Mr. C Beverly Hills Hotel on August 5, 2021 and $25.6 million with the acquisition of The Ritz-Carlton Reserve Dorado Beach on March 11, 2022, respectively.

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Fluctuations in rooms revenue between the 2022 period and the 2021 period are a result of the changes in occupancy and ADR between the 2022 period and the 2021 period as reflected in the table below (dollars in thousands):

Hotel Property Favorable (Unfavorable)
Rooms Revenue Occupancy
(change in bps) ADR (change in %)
Comparable
Capital Hilton $ 15,633 3,654 55.4 %
Marriott Seattle Waterfront (1)
5,434 758 29.2 %
The Notary Hotel 7,689 2,065 23.7 %
The Clancy
14,997 2,166 84.0 %
Sofitel Chicago Magnificent Mile 8,859 2,301 24.2 %
Pier House Resort & Spa 3,625 (543) 28.4 %
The Ritz-Carlton St. Thomas 4,249 (252) 13.9 %
Park Hyatt Beaver Creek Resort & Spa 6,639 686 38.3 %
Hotel Yountville 1,798 (386) 28.5 %
The Ritz-Carlton Sarasota 6,605 63 17.1 %
Hilton La Jolla Torrey Pines 9,749 2,374 26.9 %
Bardessono Hotel and Spa 1,629 (185) 15.7 %
The Ritz-Carlton Lake Tahoe 5,362 142 28.4 %
Total $ 92,268 1,637 10.5 %
Non-comparable
Mr. C Beverly Hills Hotel $ 8,641 1,920 2.4 %
The Ritz-Carlton Reserve Dorado Beach $ 25,593 n/a n/a
Total $ 34,234

~~________~~

~~(1)This hotel was under renovation during the 2022 period.~~

~~Food and Beverage Revenue~~. Food and beverage revenue increased $55.6 million, or 91.2%, to $116.6 million during the 2022 period compared to the 2021 period. This increase is primarily driven by the recovery from the COVID-19 pandemic. We experienced an aggregate increase in food and beverage revenue of $43.0 million at 13 comparable hotel properties as well as increases of $3.1 million and $9.5 million at the Mr. C Beverly Hills Hotel and The Ritz-Carlton Reserve Dorado Beach, respectively.

~~Other Hotel Revenue~~. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $18.7 million, or 46.2%, to $59.1 million during the 2022 period compared to the 2021 period.

The increase is attributable to higher other hotel revenue of $11.7 million at 12 comparable hotel properties and an increase of $813,000 at the Mr. C Beverly Hills Hotel and $6.3 million at The Ritz-Carlton Reserve Dorado Beach, partially offset by a decrease of $36,000 at Marriott Seattle Waterfront.

~~Rooms Expense~~. ~~Rooms expense increased $28.2 million, or 67.8%, to $69.7~~$1.8 million in the 2022 period compared to the 2021 period. The increase is attributable to an aggregate increase in rooms expense of $19.8 million at 13 comparable hotel properties due to the hotel properties recovering from the COVID-19 pandemic and increases of $2.4 million at the Mr. C Beverly Hills Hotel and $5.9 million at The Ritz-Carlton Reserve Dorado Beach.

~~Food and Beverage Expense~~. ~~Food and beverage expense increased $40.7 million, or 80.6%, to $91.2 million during the 2022 period compared to the 2021 period.~~

The increase is attributable to an aggregate increase of $29.4 million at 13 comparable hotel properties and increases of $2.8 million at the Mr. C Beverly Hills Hotel and $8.5 million at The Ritz-Carlton Reserve Dorado Beach.

~~Other Operating Expenses~~. Other operating expenses increased $51.0 million, or 52.0%, to $149.1 million in the 2022 period compared to the 2021 period. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. We experienced an increase of $5.8 million in direct expenses and $45.2 million in indirect expenses and incentive management fees in the 2022 period compared to the 2021 period.

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Direct expenses were 4.2% of total hotel revenue in the 2022 period and 5.1% in the 2021 period. The increase in direct expenses is associated with higher direct expenses at our comparable hotel properties as they are recovering from the COVID-19 pandemic, as well as an increase of $59,000 at the Mr. C Beverly Hills Hotel and $3.5 million at The Ritz-Carlton Reserve Dorado Beach.

The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $17.9 million comprising an increase of $11.5 million at our 13 comparable hotel properties and $6.3 million at the two acquired hotel properties; (ii) marketing costs of $12.3 million comprising an increase of $9.5 million at our 13 comparable hotel properties and $2.9 million at the two acquired hotel properties; (iii) repairs and maintenance of $5.1 million comprising an increase of $2.5 million at our 13 comparable hotel properties and $2.6 million at the two acquired hotel properties; (iv) lease expense of $1.2 million comprising an increase of $1.0 million at our 13 comparable hotel properties and $202,000 at the two acquired hotel properties; (v) energy costs of $4.9 million comprised of an increase of $2.5 million at our 13 comparable hotel properties and $2.4 million at the two acquired hotel properties; and (vi) incentive management fees of $3.8 million comprising an increase of $3.4 million at our 13 comparable hotel properties and $396,000 at the two acquired hotel properties.

~~Management Fees~~. Base management fees increased $5.7 million, or 63.0%, to $14.8 million in the 2022 period compared to the 2021 period. Management fees increased approximately $4.5 million at 12 of our comparable hotel properties, $372,000 at the Mr. C Beverly Hills Hotel and $1.3 million at The Ritz-Carlton Reserve Dorado Beach. These increases were partially offset by a decrease of $502,000 at the Sofitel Chicago Magnificent Mile primarily as a result of a legal settlement with Accor. See Item 1. “Legal Proceedings.”

~~Property Taxes, Insurance and Other~~. Property taxes, insurance and other decreased $4.3 million, or 16.0%, to $22.7 million in the 2022 period compared to the 2021 period. The decrease is mainly resulted from an aggregate decrease of $7.7 million at six hotel properties, including a $4.1 million and $2.4 million decrease at the Sofitel Chicago Magnificent Mile and Marriott Seattle Waterfront, respectively, due to lower property tax assessments. The decrease is partially offset by increases of $784,000 at the Mr. C Beverly Hills Hotel and $1.4 million at The Ritz-Carlton Reserve Dorado Beach as a result of their acquisitions, as well as an aggregate increase of approximately $1.1 million at seven hotel properties.

~~Depreciation and Amortization~~. Depreciation and amortization increased $2.7 million, or 5.0%, to $57.6 million for the 2022 period compared to the 2021 period. The increase comprised $1.5 million at the Mr. C Beverly Hills Hotel and $3.5 million at The Ritz-Carlton Reserve Dorado Beach as a result of their acquisitions as well as an aggregate increase of $1.7 million at the Park Hyatt Beaver Creek Resort & Spa, Marriott Seattle Waterfront, The Ritz-Carlton St. Thomas and The Ritz-Carlton Lake Tahoe. These increases were partially offset by an aggregate decrease of $3.9 million at nine comparable hotel properties primarily due to fully depreciated assets.

~~Advisory Services Fee.~~ Advisory services fee increased $6.1 million, or 37.6%, to $22.5 million in the 2022 period compared to the 2021 period due to increases in the base advisory fee of $1.5 million, reimbursable expenses of $1.8 million, equity-based compensation of $1.6 million, and incentive fee of $1.3 million.

In the 2022 period, we recorded an advisory services fee of $22.5 million, which included a base advisory fee of $9.4 million, reimbursable expenses of $3.5 million, $8.3 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and an incentive fee of $1.3 million.

In the 2021 period, we recorded an advisory services fee of $16.3 million, which included a base advisory fee of $8.0 million, reimbursable expenses of $1.7 million and $6.7 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

~~(Gain) loss on legal settlements~~. In the 2021 period, we recognized a gain of $800,000 related to the settlement of a transfer tax matter with the City of San Francisco and $189,000 related to a billing dispute. During the 2022 period, the Company received an additional payment of approximately $114,000 related to accrued interest on the initial settlement amount associated with the City of San Francisco transfer tax matter.

~~Transaction costs~~. In the 2021 period, we recognized $571,000 of transaction costs associated with the acquisition of the Mr. C Beverly Hills Hotel that closed on August 5, 2021. There were no transaction costs in the 2022 period.

~~Corporate General and Administrative~~. Corporate general and administrative expense was $14.0 million in the 2022 period and $6.1 million in the 2021 period. The increase in corporate general and administrative expenses is primarily due to higher professional fees of $1.4 million, higher public company costs of $287,000, higher reimbursed operating expenses of Ashford Securities of $5.2 million and higher miscellaneous expenses of $1.0 million. During the third quarter of 2022, the funding estimate to Ashford Securities was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities that resulted in additional expense of approximately $5.2 million.

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~~Gain (loss) on Insurance Settlement and Disposition of Assets~~. In the 2021 period, we recognized a gain of $481,000 associated with proceeds received from an insurance claim and a gain of $18,000 upon disposition of certain fixed assets as well as a gain of $197,000 associated with the sale of certain ERFP assets to Ashford Inc. There was no such gain (loss) in the 2022 period.

~~Equity in Earnings (Loss)of Unconsolidated Entity~~. ~~In the 2022 period and the 2021 period, we recorded equity in loss of unconsolidated entity of $220,000 and $198,000, respectively, related to our investment in OpenKey.~~

~~Other Income (Expense).~~ ~~Other income was $27,000 in the 2022 period compared to $0 in the 2021 period. In the 2022 period, we recorded income of $27,000 related to payments from counterparties on interest rate caps.~~

~~Interest Income~~. Interest income was $932,000 and $34,000 in the 2022 period and the 2021 period, respectively. The increase in interest income was primarily related to higher cash balances and higher interest rates in the 2022 period compared to the 2021 period.

~~Interest Expense and Amortization of Discounts and Loan Costs~~. Interest expense and amortization of discounts and loan costs increased $10.9 million, or 49.0%, to $33.3 million for the 2022 period compared to the 2021 period. The increase is primarily due to higher interest expense from a higher average LIBOR rate, as well as higher interest expense from our Convertible Senior Notes and the mortgage loans associated with the Mr. C Beverly Hills Hotel and The Ritz-Carlton Reserve Dorado Beach acquisitions. The average LIBOR rates for the 2022 period and the 2021 period were 0.62% and 0.10%, respectively.

~~Write-off of Loan Costs and Exit Fees.~~ Write-off of loan costs and exit fees was $106,000 in the 2022 period primarily resulting from the refinance of the Park Hyatt Beaver Creek Resort & Spa in February 2022, the acquisition of The Ritz-Carlton Reserve Dorado Beach and the mortgage loan extension of The Ritz-Carlton St. Thomas.

Write-off of loan costs and exit fees was $2.0 million in the 2021 period, primarily associated with a $1.2 million write-off of unamortized loan costs upon the payoff of our secured term loan payoff and $351,000 from several amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments. Third-party fees incurred in conjunction with these amendments, totaling $351,000, were expensed in accordance with applicable accounting guidance. In addition, there was approximately a $419,000 write-off of loan costs upon the $20 million pay-down of the mortgage loan assumed with the acquisition of the Mr. C Beverly Hills Hotel.

~~Unrealized Gain (Loss) on Derivatives~~. ~~Unrealized gain on derivatives of $4.0 million for the 2022 period consisted of an unrealized gain of approximately $3.0 million on interest rate caps, and approximately $995,000 on warrants.~~

Unrealized gain on derivatives of $64,000 for the 2021 period consisted of an unrealized gain of approximately $190,000 on warrants, partially offset by an unrealized loss of approximately $126,000 on interest rate caps.

~~Income Tax (Expense) Benefit~~. Income tax expense increased $3.0 million, from $766,000 in the 2021 period to $3.8 million in the 2022 period. This increase was primarily due to an increase in the profitability of our TRS entities in the 2022 period compared to the 2021 period.

~~(Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities~~. Our noncontrolling interest partner in consolidated entities was allocated income of $2.3 million and a loss of $2.5 million for the 2022 period and the 2021 period, respectively. At both September 30, 2022 and 2021, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

~~Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership.~~ ~~Noncontrolling interests in operating partnership were allocated net income of $647,000 in the 2022 period and a net loss of $3.2 million in the 2021~~ period. Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately ~~7.66%~~6.63% and ~~8.35%~~7.59% as of ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including:

•advisory fees payable to Ashford LLC;

•recurring maintenance necessary to maintain our hotel properties in accordance with brand standards;

•interest expense and scheduled principal payments on outstanding indebtedness;

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•dividends on our common stock;

•dividends on our preferred stock; and

•capital expenditures to improve our hotel properties.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, capital market activities, our Revolving Credit Facility and existing cash balances.

Pursuant to the advisory agreement between us and our advisor, we must pay our advisor on a monthly basis a base advisory fee, subject to a minimum base advisory fee. The minimum base advisory fee is equal to the greater of: (i) 90% of the base fee paid for the same month in the prior fiscal year; and (ii) 1/12th of the “G&A Ratio” for the most recently completed fiscal quarter multiplied by our total market capitalization on the last balance sheet date included in the most recent quarterly report on Form 10-Q or annual report on Form 10-K that we file with the SEC. Thus, even if our total market capitalization and performance decline, we will still be required to make payments to our advisor equal to the minimum base advisory fee, which could adversely impact our liquidity and financial condition.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotel properties and redevelopments, renovations, expansions and other capital expenditures that need to be made periodically with respect to our hotel properties and scheduled debt payments. We expect to meet our long-term liquidity requirements through various sources of capital, including future common and preferred equity issuances, existing working capital, net cash provided by operations, hotel mortgage indebtedness and other secured and unsecured borrowings. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, ~~including the current and ongoing effects of COVID-19 on our business and the hotel industry,~~ the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity and market perceptions about us. The success of our business strategy will depend, in part, on our ability to access these various capital sources. While management cannot provide any assurances, management believes that our cash flow from operations and our existing cash balances will be adequate to meet upcoming anticipated requirements for interest and principal payments on debt (excluding any potential final maturity principal ~~payments)~~payments and paydowns for extension tests), working capital, and capital expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S. federal income tax purposes.

Our hotel properties will require periodic capital expenditures and renovation to remain competitive. In addition, acquisitions, redevelopments or expansions of hotel properties may require significant capital outlays. We may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures, acquisitions or hotel redevelopment through retained earnings is very limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects could be materially and adversely affected.

Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties ~~decline.~~declines. When these provisions are triggered, substantially all of the profit generated by the hotel properties securing such loan is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. This could affect our liquidity and our ability to make distributions to our stockholders until such time that a cash trap is no longer in effect for such loan. These cash trap provisions have been triggered on ~~some of our~~one mortgage ~~loans,~~loan, as discussed ~~above.~~below. Our ~~loans~~loan that is in a cash trap may remain subject to the cash trap provisions for a substantial period of time which could limit our flexibility and adversely affect our financial condition or our qualification as a REIT. As of ~~September~~June 30, ~~2022,~~2023, our ~~$435~~$293.2 million mortgage loan was in a cash trap and approximately ~~$139,000~~$1.1 million of our restricted cash was subject to this cash trap.

As of June 30, 2023, the Company held cash and cash equivalents of $128.0 million and restricted cash of $63.4 million, the vast majority of which is comprised of lender and manager-held reserves. As of June 30, 2023, $15.4 million was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs. At June 30, 2023, our net debt to gross assets was 37.3%.

The Company's cash and cash equivalents are primarily comprised of corporate cash invested in short-term U.S. Treasury securities with maturity dates of less than 90 days and corporate cash held at commercial banks in Insured Cash Sweep (“ICS”) accounts, which are fully insured by the FDIC. The Company’s cash and cash equivalents also includes property-level operating cash deposited with commercial banks that have been designated as a Global Systemically Important Bank (“G-SIB”) by the Financial Stability Board (“FSB”) and a small amount deposited with other commercial banks.

Equity Transactions

On December ~~5, 2017,~~7, 2022, our board of directors approved ~~the~~a new stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share, ~~and preferred stock~~

having an aggregate value of up to ~~$50~~$25 million. The board of directors’ authorization replaced any previous repurchase authorizations. ~~No shares were repurchased during~~During the ~~nine~~six months ended ~~September~~June 30, ~~2022, pursuant to this authorization.~~

~~On December 11, 2017,~~2023, we ~~entered into equity distribution agreements with certain sales agents to sell from time to time~~repurchased 3.9 million shares of our common stock ~~having an aggregate offering price of up to $50.0~~for approximately $18.9 million. ~~Sales of shares of our common stock, if~~

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any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 of the Securities Act, including sales made directly on the NYSE, the existing trading market for our common stock, or sales made to or through a market maker other than on an exchange or through an electronic communications network. We will pay each of the sales agents a commission, which in each case shall not be more than 2.0% of the gross sales price of the shares of our common stock sold through such sales agent. On July 7, 2020, we entered into a side letter (the “Side Letter”) with the sales agents pursuant to which we agreed to pay all reasonable documented out-of-pocket expenses, including the reasonable fees and disbursements of counsel incurred by the sales agents, in connection with the ongoing services contemplated by the equity distribution agreements (subject to a $75,000 cap on certain expenses incurred in June 2020). Pursuant to the Side Letter, the sales agents have agreed to reimburse us for up to $50,000 of such expenses, if the sales agents offer and sell an amount of our common stock with an aggregate offering price of $15,000,000, and have agreed to reimburse us for up to an additional $50,000 of such expenses, provided the sales agents offer and sell an amount of our common stock with an aggregate offering price of $30,000,000. As of ~~November 3, 2022,~~June 30, 2023, the Company has ~~sold approximately 7.4~~completed the $25.0 million ~~shares of common stock and received gross proceeds of approximately~~ ~~$30.8 million~~ ~~under this program.~~repurchase authorization.

On November 13, 2019, we filed an initial registration statement with the SEC, as amended on January 24, 2020, for shares of our non-traded Series E Redeemable Preferred Stock (the “Series E Preferred Stock”) and our non-traded Series M Redeemable Preferred Stock (the “Series M Preferred Stock”). The registration statement became effective on February 21, 2020, and contemplates the issuance and sale of up to 20,000,000 shares of Series E Preferred Stock or Series M Preferred Stock in a primary offering and up to 8,000,000 shares of Series E Preferred Stock or Series M Preferred Stock pursuant to a dividend reinvestment plan. On February 25, 2020, we filed our prospectus with the SEC. Ashford Securities, a subsidiary of Ashford Inc., serves as the dealer manager and wholesaler of the Series E Preferred Stock and Series M Preferred Stock. On April 2, 2021, the Company filed with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”) articles supplementary to the Company’s Articles of Amendment and Restatement that provided for: (i) reclassifying the existing 28,000,000 shares of Series E Preferred Stock and 28,000,000 shares of Series M Preferred Stock as unissued shares of preferred stock; (ii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series E Preferred Stock (the “Series E Articles Supplementary”); and (iii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series M Preferred Stock (the “Series M Articles Supplementary”). The Series E Articles Supplementary and Series M Articles Supplementary were filed to revise the preferred stock terms related to the dividend rate, our optional redemption right and certain other voting rights. The Company also caused its operating partnership to execute Amendment No. 5 to the Third Amended and Restated Agreement of Limited Partnership to amend the terms of its operating partnership agreement to conform to the terms of the Series E Articles Supplementary and Series M Articles Supplementary. ~~As of November 3, 2022,~~On February 21, 2023, the Company ~~has~~announced the closing of its offering of the Series E Preferred Stock and Series M Preferred Stock. The Company issued approximately ~~10.3~~16.4 million shares of Series E Preferred Stock and received net proceeds of approximately ~~$231.8~~$369.5 million and issued approximately ~~1.2~~2.0 million shares of Series M Preferred Stock and received net proceeds of approximately ~~$30.1~~$47.6 million. ~~The Company also issued approximately 33,000 shares of Series E Preferred Stock and approximately 1,200 shares of Series M Preferred Stock, respectively, pursuant to the dividend reinvestment plan.~~

On February 4, 2021, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd. (“YA”), pursuant to which the Company will be able to sell up to 7,780,786 shares of its common stock (the “Commitment Amount”) at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating on the earliest of (i) the first day of the month next following the 36-month anniversary of the SEDA or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”). Other than with respect to the Initial Advance (as defined below) the shares sold to YA pursuant to the SEDA would be purchased at 95% of the Market Price (as defined below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock. “Market Price” means the lowest daily VWAP of the Company’s common stock during the five consecutive trading days commencing on the trading day following the date the Company submits an advance notice to YA. “VWAP” means, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the principal market as reported by Bloomberg L.P. during regular trading hours.

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additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $10,000 structuring fee. As of ~~November~~August 3, ~~2022,~~2023, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $10.0 million under the SEDA.

On April 21, 2021, the Company entered into a purchase agreement (the “Lincoln Park Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company may issue or sell to Lincoln Park up to 8,893,565 shares of the Company’s common stock from time to time during the term of the Lincoln Park Purchase Agreement. The issuance of the shares of common stock pursuant to the Lincoln Park Purchase Agreement has been registered pursuant to the Company’s shelf registration statement on Form S-3 (the “Registration Statement”), and the related base prospectus included in the Registration Statement, as supplemented by a prospectus supplement filed with the SEC on April 21, 2021. The Company and Lincoln Park also entered into a registration rights agreement, pursuant to which the Company agreed to maintain the

effectiveness of the Registration Statement. Upon entering into the Lincoln Park Purchase Agreement, the Company issued 15,000 shares of the Company’s common stock as consideration for Lincoln Park’s execution and delivery of the Lincoln Park Purchase Agreement. As of ~~November~~August 3, ~~2022,~~2023, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $4.2 million under the Lincoln Park Purchase Agreement.

On July 12, 2021, the Company entered into ~~a second~~an equity distribution agreement (the “Virtu July 2021 EDA”) with Virtu to sell from time to time shares of our common stock having an aggregate offering price of up to $100 million. We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of ~~November~~August 3, ~~2022,~~2023, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.

Debt Transactions

On ~~February 2, 2022,~~January 18, 2023, the Company ~~refinanced~~repaid its $54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach, which resulted in a gain on extinguishment of debt of $2.3 million for the ~~Park Hyatt Beaver Creek Resort & Spa, which had a final~~three and six months ended June 30, 2023. The gain was primarily attributable to the premium that was recorded upon the assumption of the mortgage loan when the hotel was acquired.

On April 4, 2023, the Company amended the mortgage loan secured by The Ritz-Carlton Sarasota. Terms of the amendment replaced the variable interest rate of LIBOR + 2.65% with SOFR + 2.75%, extended the current maturity date to October 2023, and added one six-month extension option, subject to satisfaction of certain conditions. Effective June 1, 2023, the variable interest rate increased from SOFR + 2.75% to SOFR + 3.60% in accordance with the loan agreement. The Company paid Lismore approximately $98,000 for the successful execution of The Ritz-Carlton Sarasota loan modification and extension.

On April ~~2022. The new, non-recourse~~18, 2023, the Company amended the mortgage loan ~~totals $70.5~~secured by Hotel Yountville. Terms of the amendment replaced the variable interest rate of LIBOR + 2.55% with SOFR + 2.65%, extended the current maturity date to November 2023, and added one six-month extension option, subject to satisfaction of certain conditions.

On June 13, 2023, the Company finalized an extension of its $435 million mortgage loan secured by four properties: The Notary Hotel, The Clancy, Sofitel Chicago Magnificent Mile, and ~~has~~Marriott Seattle Waterfront. The loan is being extended beyond its original initial maturity in June 2023 for an additional twelve months. In conjunction with the extension, the Company paid down $142 million of the loan utilizing corporate cash on hand, which reduced the balance to approximately $293 million. As part of the extension the Company also purchased an interest rate cap through June 2024 with a ~~two-year~~strike rate of 4.69%.

The Credit Agreement evidences a $200 million senior secured credit facility (the “Facility”) comprised of a senior secured term loan facility of $150 million (the “Term Loan Facility”) and a senior secured revolving credit facility of $50 million (the “Revolving Credit Facility”). Upon satisfaction of certain conditions, including the addition of new Borrowing Base Properties (as defined in the Credit Agreement), the Facility may be increased to a size of not more than $400 million in the aggregate. The maximum availability under the Facility is determined on a quarterly basis and limited to the lesser of (i) $200 million (subject to increase of up to $400 million in the aggregate); (ii) 55% of the appraised value of all Borrowing Base Properties; and (iii) the DSC Amount (as defined below). The initial ~~term~~Borrowing Base Properties include the Company’s Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville hotel properties (the “Initial Borrowing Base Properties”). The “DSC Amount” means the maximum principal amount that can be supported from the Adjusted NOI (as defined in the Credit Agreement) from the Borrowing Base Properties assuming (i) a 30-year amortization and an interest rate which is the greater of (a) the ten (10) year U.S. Treasury Rate plus 2.50% and (b) 7.50%; and (ii) a minimum debt service coverage of 1.75 to 1.00.

The proceeds of the Term Loan Facility were used to repay the mortgage debt associated with ~~three~~The Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville, which will serve as the Initial Borrowing Base Properties for the financing. In addition, at closing, the Company drew down approximately $46 million under the Revolving Credit Facility.

The Facility is a three-year interest-only facility with all outstanding principal due at maturity, with a one-year extension ~~options,~~option, subject to the satisfaction of certain ~~conditions.~~ conditions including the payment of an Extension Fee (as defined in the Credit Agreement) equal to 20 basis points (0.20%) of the outstanding Facility amount.

The ~~mortgage loan~~Credit Agreement is ~~interest only and provides for a floating interest rate of SOFR + 2.86%.~~

~~On March 11, 2022, in connection with the acquisition of The Ritz-Carlton Reserve Dorado Beach~~guaranteed by the Company, ~~assumed~~the Borrower and certain other eligible subsidiaries of the Company and secured by: (i) perfected lien mortgages or deeds of trust and security interests in the Borrowing Base Properties (as defined in the Credit Agreement); (ii) assignments of leases and rents with respect to the Borrowing Base Properties; (iii) assignments of all management agreements, franchise agreements, licenses and other material agreements relating to the Borrowing Base Properties; (iv) perfected first priority liens on all reserve accounts and all operating accounts related to each Borrowing Base Property; and (v) perfected first priority liens on and security interests in each subsidiary guarantor owning a ~~$54.0 million mortgage loan. See note 6~~Borrowing Base Property.

Borrowings under the Credit Agreement will bear interest at Daily SOFR or Term SOFR plus 10 basis points (with a 0% floor) plus the applicable margin. Depending on the Company’s Net Debt to ~~our condensed~~EBITDA ratio, the applicable margin for SOFR ranges from 2.25% to 3.00%. Default interest would accrue at the applicable rate plus 2.0%.

Financial covenants are generally based on the financial condition and results of operations of the Company and its consolidated ~~financial statements.~~subsidiaries and include, among others, the following:

(i) a Consolidated Leverage Ratio (i.e., Consolidated Net Debt to the Consolidated Total Asset Value) of not more than 55%; and

The Credit Agreement includes customary events of default, and the occurrence of an event of default will permit the Lenders to terminate commitments to lend under the Credit Agreement and accelerate payments of all amounts outstanding thereunder.

Sources and Uses of Cash

We had approximately ~~$358.9~~$128.0 million and ~~$216.0~~$261.5 million of cash and cash equivalents at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

We anticipate that our principal sources of funds to meet our cash requirements will include cash on hand, positive cash flow from operations and capital market activities.

Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities were ~~$104.0~~$62.0 million and ~~$55.1~~$79.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Cash flows from operations were impacted by changes in hotel operations of our 1314 comparable hotel properties, ~~as well as the acquisitions of the Mr. C Beverly Hills Hotel on August 5, 2021 and~~ The Ritz-Carlton Reserve Dorado Beach, acquired on March 11, 2022, and the Four Seasons Resort Scottsdale, acquired on December 1, 2022. Cash flows from operations are also impacted by the timing of working capital cash flows such as collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties and settling with hotel managers.

Net Cash Flows Provided by (Used in) Investing Activities. For the ~~nine~~six months ended ~~September~~June 30, 2023, net cash flows used in investing activities were $36.1 million. These cash outflows were primarily attributable to $36.2 million of capital improvements made to various hotel properties and a $158,000 loan to OpenKey partially offset by cash inflows of $327,000 related to proceeds from property insurance. Our capital improvements consisted of approximately $24.3 million of return on investment capital projects and approximately $11.9 million of renewal and replacement capital projects.

For the six months ended June 30, 2022, net cash flows used in investing activities were ~~$123.6~~$106.8 million. These cash outflows were primarily attributable to ~~$36.5~~$19.9 million of capital improvements made to various hotel properties and approximately $86.8 million associated with the acquisition of The Ritz-Carlton Reserve Dorado ~~Beach and additional investments in OpenKey of $328,000.~~Beach. Our capital improvements consisted of ~~$22.1~~$13.4 million of return on investment capital projects and ~~$14.4~~$6.5 million of renewal and replacement capital projects.

Return on investment capital projects are designed to improve the positioning of our hotel properties within their markets and competitive sets. Renewal and replacement capital projects are designed to maintain the quality and competitiveness of our hotels.

For the nine months ended September 30, 2021, net cash flows used in investing activities were $23.7 million. These cash outflows were primarily attributable to $15.8 million of capital improvements made to various hotel properties, approximately $9.5 million associated with the acquisition of the Mr. C Beverly Hills Hotel, partially offset by proceeds of $1.8 million from the sale of certain ERFP assets to Ashford Inc. Our capital improvements consisted of approximately $7.5 million of return on investment capital projects and approximately $8.4 million of renewal and replacement capital projects.

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Net Cash Flows Provided by (Used in) Financing Activities. For the ~~nine~~six months ended ~~September~~June 30, 2023, net cash flows used in financing activities were $150.1 million. Cash outflows primarily consisted of repayments of indebtedness of $196.4 million, $26.1 million of dividend and distribution payments, $19.3 million of payments to repurchase common stock, payments of $7.2 million for the redemption of operating partnership units, $3.4 million to purchase interest rate caps, $2.0 million of distributions to a noncontrolling interest in consolidated entities and $904,000 for cash redemptions of Series E and Series M preferred stock. These cash outflows were partially offset by cash inflows of $97.9 million from the issuance of preferred stock, $4.0 million of contributions from a noncontrolling interest in consolidated entities and $4.0 million of proceeds from in-the-money interest rate caps.

For the six months ended June 30, 2022, net cash flows provided by financing activities were ~~$169.1~~$62.8 million. Cash inflows primarily consisted of debt borrowings of $70.5 million, ~~$185.2~~$71.0 million from the issuance of preferred stock and contributions of $164,000 from a noncontrolling interest in consolidated entities. The cash inflows were partially offset by repayments of indebtedness of ~~$68.3~~$68.0 million, ~~$13.0~~$7.3 million of dividend and distribution payments, ~~$1.8~~$1.7 million of payments for loan costs and fees ~~$2.1~~and $1.1 million of payments ~~for derivatives, $1.3 million for purchases of common stock and $193,000 for cash redemptions of Series E and Series M preferred stock.~~

For the nine months ended September 30, 2021, net cash flows provided by financing activities were $95.6 million. Cash inflows primarily consisted of net proceeds of $83.2 million from the issuance of our Convertible Senior Notes, $100.0 million from the issuance of common stock, $4.6 million from the issuance of preferred stock and contributions of $920,000 from a noncontrolling interest in consolidated entities. The cash inflows were partially offset by repayments of indebtedness of $83.8 million, $6.9 million of dividend and distribution payments, $1.9 million of payments for loan costs and fees, $376,000 for purchases of common stock and $200,000 of payment for derivatives.

Dividend Policy. ~~In March~~On December 8, 2022, ~~the~~our board of directors approved ~~an update to our previously announced~~the Company’s dividend policy for ~~2022 to revise our then-expectation~~2023. The Company expects to pay a quarterly cash dividend of ~~$0.01~~$0.05 per share offor the Company’s common stock ~~during 2022.~~for 2023, or $0.20 per share on an annualized basis. On ~~September 8, 2022,~~April 5, 2023, our board of directors declared a quarterly cash dividend of ~~$0.01~~$0.05 per diluted share for the ~~Company’s common stock for the third~~second quarter of ~~2022.~~2023. The approval of our dividend policy does not commit our board of directors to declare future dividends with respect to any quantity or the amount thereof. The board ~~of directors~~ will continue to review our dividend policy on a quarter-to-quarter basis and make announcements with respect thereto. For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof.

Seasonality

Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as pandemics, extreme weather conditions, natural disasters, terrorist attacks or alerts, civil unrest, government shutdowns, airline strikes or reduced airline capacity, economic factors and other considerations affecting travel. To the extent that cash flows from operations and cash on hand are insufficient during any quarter due to temporary or seasonal fluctuations in lease revenue, we expect to utilize borrowings to fund distributions required to maintain our REIT status. However, we cannot make any assurances that we will make distributions in the future.

Critical Accounting Policies

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2021~~2022 Form 10-K. There have been no material changes in these critical accounting policies.

Non-GAAP Financial Measures

The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO are presented to help our investors evaluate our operating performance.

EBITDA is defined as net income (loss) before interest expense and amortization of loan costs, depreciation and amortization, income taxes, equity in (earnings) loss of unconsolidated entity and after the Company’s portion of EBITDA of OpenKey. In addition, we ~~excluded~~exclude impairment on real estate, (gain) loss on ~~insurance settlement and~~ disposition of assets and Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by NAREIT.

We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable) contract assets (liabilities), transaction and conversion costs, write-off of loan costs and exit fees, ~~legal,~~ advisory and settlement costs, advisory services incentive fee, ~~other/income expense,~~gain/loss on extinguishment of debt, stock/unit-based compensation and the Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/ loss on derivatives.

We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy

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general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions. EBITDA, EBITDAre and Adjusted EBITDAre as calculated by us may not be comparable to EBITDA, EBITDAre and Adjusted EBITDAre reported by other companies that do not define EBITDA, EBITDAre and Adjusted EBITDAre exactly as we define the terms. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as an indicator of liquidity.

The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Net income (loss)	Net income (loss)	$	(8,383)	$	(8,219)	$	23,901	$	(30,617)		Net income (loss)	$	(3,138)	$	16,680	$	13,466	$	32,284
Interest expense and amortization of loan costs	Interest expense and amortization of loan costs	14,490		8,364		33,293		22,346			Interest expense and amortization of loan costs	23,600		10,281		46,473		18,803
Depreciation and amortization	Depreciation and amortization	19,604		18,284		57,616		54,881			Depreciation and amortization	22,567		19,571		45,088		38,012
Income tax expense (benefit)	Income tax expense (benefit)	95		560		3,783		766			Income tax expense (benefit)	(75)		1,077		2,254		3,688
Equity in (earnings) loss of unconsolidated entity	Equity in (earnings) loss of unconsolidated entity	74		68		220		198			Equity in (earnings) loss of unconsolidated entity	75		74		148		146
Company’s portion of EBITDA of OpenKey	Company’s portion of EBITDA of OpenKey	(74)		(68)		(220)		(196)			Company’s portion of EBITDA of OpenKey	(80)		(75)		(157)		(146)
EBITDA		25,806		18,989		118,593		47,378
EBITDA and EBITDAre											EBITDA and EBITDAre	42,949		47,608		107,272		92,787

(Gain) loss on insurance settlement and disposition of assets		—		—		—		(696)

EBITDAre		25,806		18,989		118,593		46,682

Amortization of favorable (unfavorable) contract assets (liabilities)	Amortization of favorable (unfavorable) contract assets (liabilities)	119		118		345		394			Amortization of favorable (unfavorable) contract assets (liabilities)	118		118		237		226
Transaction and conversion costs	Transaction and conversion costs	5,562		980		6,888		2,148			Transaction and conversion costs	1,056		771		2,251		1,326
Other (income) expense		(27)		—		(27)		—
Write-off of loan costs and exit fees		8		432		106		1,960

Unrealized (gain) loss on derivatives		(2,403)		(142)		(4,019)		(64)
Write-off of premiums, loan costs and exit fees											Write-off of premiums, loan costs and exit fees	248		22		260		98
Realized and unrealized (gain) loss on derivatives											Realized and unrealized (gain) loss on derivatives	(1,029)		(1,208)		(695)		(1,616)
Stock/unit-based compensation	Stock/unit-based compensation	3,391		3,044		8,941		7,265			Stock/unit-based compensation	2,899		3,185		5,227		5,550
Legal, advisory and settlement costs	Legal, advisory and settlement costs	544		107		1,176		(320)			Legal, advisory and settlement costs	12		315		81		632
Advisory services incentive fee	Advisory services incentive fee	1,048		(1,637)		1,294		—			Advisory services incentive fee	—		(731)		—		246
(Gain) loss on extinguishment of debt											(Gain) loss on extinguishment of debt	—		—		(2,318)		—

Company’s portion of adjustments to EBITDAre of OpenKey	Company’s portion of adjustments to EBITDAre of OpenKey	1		1		6		7			Company’s portion of adjustments to EBITDAre of OpenKey	—		(1)		—		5
Adjusted EBITDAre	Adjusted EBITDAre	$	34,049	$	21,892	$	133,303	$	58,072		Adjusted EBITDAre	$	46,253	$	50,079	$	112,315	$	99,254

FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to common stockholders, computed in accordance with GAAP, excluding gains or losses on ~~insurance settlement and~~ disposition of assets, plus impairment charges on real estate, depreciation and amortization of real estate assets, and after redeemable noncontrolling interests in the operating partnership and adjustments for unconsolidated entities. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. Our calculation of Adjusted FFO excludes ~~gain/loss on extinguishment of preferred stock, deemed dividends on redeemable preferred stock,~~ transaction and conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, ~~other income/expense,~~ stock/unit-based compensation, gain/loss on extinguishment of debt and non-cash items such as deemed dividends on redeemable preferred stock, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives and the Company’s portion of adjustments to FFO of OpenKey. FFO and Adjusted FFO exclude amounts attributable to the portion of a partnership owned by the third-party. We present FFO and Adjusted FFO because we consider FFO and Adjusted FFO important supplemental measures of our operational performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and Adjusted FFO when reporting their results. FFO and Adjusted FFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and Adjusted FFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and Adjusted FFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. We consider FFO and Adjusted FFO to be appropriate measures of our ongoing normalized operating performance as a REIT. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in

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accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO and Adjusted FFO do not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income or loss as an indication of our financial performance or GAAP cash flows from operating activities as a measure of our liquidity. FFO and Adjusted FFO are also not indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO and Adjusted FFO should be considered along with our net income or loss and cash flows reported in our condensed consolidated financial statements.

The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			Three Months Ended June 30,				Six Months Ended June 30,
		(restated)				(restated)					2023		2022		2023		2022
Net income (loss)	Net income (loss)	$	(8,383)	$	(8,219)	$	23,901	$	(30,617)	Net income (loss)	$	(3,138)	$	16,680	$	13,466	$	32,284
(Income) loss attributable to noncontrolling interest in consolidated entities	(Income) loss attributable to noncontrolling interest in consolidated entities	(823)		450		(2,265)		2,546		(Income) loss attributable to noncontrolling interest in consolidated entities	367		(1,468)		58		(1,442)
Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership	Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership	1,166		823		(647)		3,184		Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership	925		(846)		664		(1,813)
Preferred dividends	Preferred dividends	(6,028)		(1,977)		(13,395)		(6,258)		Preferred dividends	(10,877)		(4,064)		(21,227)		(7,367)
Deemed dividends on redeemable preferred stock		(2,649)		—		(4,802)		—
Gain (loss) on extinguishment of preferred stock		—		(111)		—		(4,595)
Deemed dividends on preferred stock										Deemed dividends on preferred stock	(301)		—		(2,755)		—

Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders	(16,717)		(9,034)		2,792		(35,740)		Net income (loss) attributable to common stockholders	(13,024)		10,302		(9,794)		21,662
Depreciation and amortization on real estate (1)	Depreciation and amortization on real estate (1)	18,956		17,619		55,678		52,843		Depreciation and amortization on real estate (1)	21,763		18,927		43,548		36,722

Net income (loss) attributable to redeemable noncontrolling interests in operating partnership	Net income (loss) attributable to redeemable noncontrolling interests in operating partnership	(1,166)		(823)		647		(3,184)		Net income (loss) attributable to redeemable noncontrolling interests in operating partnership	(925)		846		(664)		1,813
Equity in (earnings) loss of unconsolidated entity	Equity in (earnings) loss of unconsolidated entity	74		68		220		198		Equity in (earnings) loss of unconsolidated entity	75		74		148		146
(Gain) loss on insurance settlement and disposition of assets		—		—		—		(696)

Company’s portion of FFO of OpenKey	Company’s portion of FFO of OpenKey	(74)		(68)		(220)		(197)		Company’s portion of FFO of OpenKey	(85)		(74)		(163)		(146)
FFO available to common stockholders and OP unitholders	FFO available to common stockholders and OP unitholders	1,073		7,762		59,117		13,224		FFO available to common stockholders and OP unitholders	7,804		30,075		33,075		60,197
Deemed dividends on redeemable preferred stock		2,649				4,802
(Gain) loss on extinguishment of preferred stock		—		111		—		4,595
Deemed dividends on preferred stock										Deemed dividends on preferred stock	301		—		2,755		—

Transaction and conversion costs	Transaction and conversion costs	5,562		980		6,888		2,148		Transaction and conversion costs	1,056		771		2,251		1,326

Interest expense accretion on refundable membership club benefits		177		190		545		582
Write-off of loan costs and exit fees		8		432		106		1,960
Amortization of loan costs (1)		598		407		1,793		1,684

Write-off of premiums, loan costs and exit fees										Write-off of premiums, loan costs and exit fees	248		22		260		98
Unrealized (gain) loss on derivatives	Unrealized (gain) loss on derivatives	(2,403)		(142)		(4,019)		(64)		Unrealized (gain) loss on derivatives	1,253		(1,208)		3,454		(1,616)
Stock/unit-based compensation	Stock/unit-based compensation	3,391		3,044		8,941		7,265		Stock/unit-based compensation	2,899		3,185		5,227		5,550
Legal, advisory and settlement costs	Legal, advisory and settlement costs	544		107		1,176		(320)		Legal, advisory and settlement costs	12		315		81		632
Interest expense accretion on refundable membership club deposits										Interest expense accretion on refundable membership club deposits	164		178		342		368
Amortization of loan costs										Amortization of loan costs	661		553		1,400		1,195
Advisory services incentive fee	Advisory services incentive fee	1,048		(1,637)		1,294		—		Advisory services incentive fee	—		(731)		—		246
(Gain) loss on extinguishment of debt										(Gain) loss on extinguishment of debt	—		—		(2,318)		—

Company’s portion of adjustments to FFO of OpenKey	Company’s portion of adjustments to FFO of OpenKey	1		1		6		7		Company’s portion of adjustments to FFO of OpenKey	—		(1)		—		5
Adjusted FFO available to common stockholders and OP unitholders	Adjusted FFO available to common stockholders and OP unitholders	12,648		11,255		80,649		31,081		Adjusted FFO available to common stockholders and OP unitholders	$	14,398	$	33,159	$	46,527	$	68,001

____________________

(1)Net of adjustment for noncontrolling interest in consolidated entities. The following table presents the amounts of the adjustments for noncontrolling interests for each line item:


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Depreciation and amortization on real estate	Depreciation and amortization on real estate	$	(648)	$	(665)	$	(1,938)	$	(2,038)		Depreciation and amortization on real estate	$	(804)	$	(644)	$	(1,540)	$	(1,290)

Amortization of loan costs	Amortization of loan costs	(23)		(22)		(68)		(65)			Amortization of loan costs	(24)		(23)		(47)		(45)

~~Table of Contents~~

Hotel Properties

The following table presents certain information related to our hotel properties:


Hotel Property	Hotel Property	Location	Total Rooms	% Owned		Owned Rooms	Hotel Property	Location	Total Rooms	% Owned		Owned Rooms
Fee Simple Properties	Fee Simple Properties						Fee Simple Properties
Capital Hilton	Capital Hilton	Washington, D.C.	550	75	%	413	Capital Hilton	Washington, D.C.	550	75	%	413
Marriott Seattle Waterfront	Marriott Seattle Waterfront	Seattle, WA	361	100	%	361	Marriott Seattle Waterfront	Seattle, WA	369	100	%	369
The Notary Hotel	The Notary Hotel	Philadelphia, PA	499	100	%	499	The Notary Hotel	Philadelphia, PA	499	100	%	499
The Clancy	The Clancy	San Francisco, CA	410	100	%	410	The Clancy	San Francisco, CA	410	100	%	410
Sofitel Chicago Magnificent Mile	Sofitel Chicago Magnificent Mile	Chicago, IL	415	100	%	415	Sofitel Chicago Magnificent Mile	Chicago, IL	415	100	%	415
Pier House Resort & Spa	Pier House Resort & Spa	Key West, FL	142	100	%	142	Pier House Resort & Spa	Key West, FL	142	100	%	142
The Ritz-Carlton St. Thomas	The Ritz-Carlton St. Thomas	St. Thomas, USVI	180	100	%	180	The Ritz-Carlton St. Thomas	St. Thomas, USVI	180	100	%	180
Park Hyatt Beaver Creek Resort & Spa	Park Hyatt Beaver Creek Resort & Spa	Beaver Creek, CO	190	100	%	190	Park Hyatt Beaver Creek Resort & Spa	Beaver Creek, CO	193	100	%	193
Hotel Yountville	Hotel Yountville	Yountville, CA	80	100	%	80	Hotel Yountville	Yountville, CA	80	100	%	80
The Ritz-Carlton Sarasota	The Ritz-Carlton Sarasota	Sarasota, FL	276	100	%	276	The Ritz-Carlton Sarasota	Sarasota, FL	276	100	%	276
The Ritz-Carlton Lake Tahoe (1)	The Ritz-Carlton Lake Tahoe (1)	Truckee, CA	170	100	%	170	The Ritz-Carlton Lake Tahoe (1)	Truckee, CA	170	100	%	170
Mr. C Beverly Hills Hotel (2)	Mr. C Beverly Hills Hotel (2)	Los Angeles, CA	143	100	%	143	Mr. C Beverly Hills Hotel (2)	Los Angeles, CA	143	100	%	143
The Ritz-Carlton Reserve Dorado Beach (3)	The Ritz-Carlton Reserve Dorado Beach (3)	Dorado, Puerto Rico	96	100	%	96	The Ritz-Carlton Reserve Dorado Beach (3)	Dorado, Puerto Rico	96	100	%	96
Four Seasons Resort Scottsdale							Four Seasons Resort Scottsdale	Scottsdale, AZ	210	100	%	210
Ground Lease Properties (4)	Ground Lease Properties (4)						Ground Lease Properties (4)
Hilton La Jolla Torrey Pines (5)	Hilton La Jolla Torrey Pines (5)	La Jolla, CA	394	75	%	296	Hilton La Jolla Torrey Pines (5)	La Jolla, CA	394	75	%	296

Bardessono Hotel and Spa (6)	Bardessono Hotel and Spa (6)	Yountville, CA	65	100	%	65	Bardessono Hotel and Spa (6)	Yountville, CA	65	100	%	65
Total	Total		3,971			3,736	Total		4,192			3,957

________

(1) The above information does not include the operations of the voluntary rental program with respect to condominium units not owned by ~~The Ritz-Carlton Lake Tahoe.~~the Company.

(2) Includes 138 hotel rooms and five residences adjacent to the hotel.

(3)The above information does not include the operations of the voluntary rental program with respect to residential units not owned by ~~The Ritz-Carlton Reserve Dorado Beach. The results of~~ the ~~hotel are included from March 11, 2022 through September 30, 2022.~~Company.

(4) Some of our hotel properties are on land subject to ground leases, two of which cover the entire property.

(5) The ground lease expires in 2067. The ground lease contains one extension option of either 10 or 20 years dependent upon capital investment ~~spend~~ during the lease term.

(6) The initial ground lease expires in 2065. The ground lease contains two 25-year extension options, at our election.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments that bear interest at variable rates that fluctuate with market interest rates. To the extent that we acquire assets or conduct operations in an international jurisdiction, we will also have currency exchange risk. We may enter into certain hedging arrangements in order to manage interest rate and currency fluctuations. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.

At June 30, 2023, our total indebtedness of approximately $1.1 billion included approximately $1.1 billion of variable-rate debt. The impact on the results of operations of a 25-basis point change in the interest rate on the outstanding balance of variable-rate debt at June 30, 2023, would be approximately $2.6 million per year. However, we currently have various interest rate caps in place that limit this exposure. Interest rate changes have no impact on the remaining $86.3 million of fixed-rate debt.

The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and assume no changes in our capital structure. The information presented above includes those exposures that existed at June 30, 2023, but it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies at the time, and the related interest rates.

ITEM 4.CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September~~June 30, ~~2022.~~2023. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~June 30, ~~2022,~~ 2023,as a result of the material weakness in our internal control over financial reporting related to the accounting for earnings per share described below, and for which it was not possible for the Company to remediate during the second quarter of 2023 because there were no similar transactions to evaluate, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

During our financial statement close process for the period ended December 31, 2022, a material weakness was identified in the Company’s control over the evaluation of complex transactions as a result of the error identified in the treatment of deemed dividends on redeemable preferred stock in arriving at net income (loss) attributable to common stockholders, which impacted the calculation of earnings per share. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Company is evaluating remediation steps, which could include: (1) arranging for additional training for our associates and (2) designing new or enhanced controls whereby management evaluates the nature of equity transactions and where appropriate engages third-party accounting experts to assist management in assessing the accounting in its consolidated financial statements. The material weakness will not be considered remediated until management designs and implements

~~Table of Contents~~

effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

~~The Company’s previously issued financial results for the three and nine months ended September 30, 2022 have been corrected in this quarterly report to properly reflect the correct accounting.~~

We reviewed the results of management’s assessment with the audit committee of our board of directors.

Notwithstanding the material weakness described above, management has concluded that our ~~restated~~ condensed consolidated financial statements included in this quarterly report are fairly stated in all material respects in accordance with GAAP.

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: (i) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (ii) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class; however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. The opt out period has been extended until such time that discovery has concluded. In May 2023 the trial court requested additional briefing from the parties to determine whether the case should be maintained, dismissed, or the class de-certified. The trial court set a due date of August 7, 2023 for the briefs. If this litigation goes to trial, we expect that the earliest the trial would occur is the last quarter of 2023, based on various extensions to which the parties have agreed. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time. As of June 30, 2023, no amounts have been accrued.

contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations, or cash flow. However, our assessment may change depending upon the development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty. If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.

ITEM 1A.RISK FACTORS

The discussion of our business and operations should be read together with the risk factors contained in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, filed with the SEC, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. ~~The~~In addition to the risk factors set forth ~~below should be read together with the risk factors described~~ in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, the following risk factor should be carefully considered in evaluating us and our business.

~~Economic conditions~~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 regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) insurance limit. The FDIC took control and was appointed receiver of Silicon Valley Bank, New York Signature Bank and First Republic Bank on March 10, 2023, March 12, 2023 and May 1, 2023, respectively. The Company does not have any direct exposure to Silicon Valley Bank, New York Signature Bank or First Republic Bank. However, if other banks and financial institutions enter receivership or become insolvent in the ~~United States~~future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse ~~impact~~effect on our ~~earnings~~business and financial condition.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

On December 7, 2022, our board of directors approved a new stock repurchase program pursuant to which the board granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share, having an aggregate value of up to $25 million. The ~~economic outlook~~Board’s authorization replaced any previous repurchase authorizations.

As of June 30, 2023, we repurchased approximately 5.4 million shares of our common stock for approximately $25.0 million and have completed the $25.0 million repurchase authorization.

The following table provides the information with respect to purchases and forfeitures of our common stock during each of the months in the ~~United States is uncertain~~second quarter of 2023:


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
Common stock:
April 1 to April 30	485	(1)	$	3.77	—	$	7
May 1 to May 31	—		$	—	—	$	7
June 1 to June 30	88	(1)	$	3.92	—	$	7
Total	573		$	3.79	—

__________________

(1)Represents 485 and ~~facing recessionary concerns resulting from slowing gross domestic product growth, continuing effects of the COVID-19 pandemic, rising inflation, increasing interest rates, supply chain disruptions~~88 shares in April and the conflict between Russia and Ukraine. Because economic conditions in the United States may affect demand within the hospitality industry and our subsidiaries’ businesses, current and future economic conditions in the United States, including slower growth, stock market volatility and recession fears, could have a material adverse impact on our earnings and financial condition. Economic conditions may be affected by numerous factors, including but not limitedJune, respectively, that were withheld to cover tax-withholding requirements related to the ~~pace~~vesting of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, changes in currency exchange rates, uncertainty about government fiscal and tax policy, geopolitical events, the regulatory environment and the availability of credit and interest rates.

~~Inflation and price volatility could negatively impact our businesses and results of operations.~~

General inflation in the United States has risen to levels not experienced in recent decades, including rising energy prices, prices for consumer goods, interest rates, wages, and currency volatility, causing interest rates and borrowing costs to rise. These increases and any fiscal, monetary or other policy interventions by the U.S. government or Federal Reserve in reaction to such events could negatively impact our businesses by increasing our operating costs and our borrowing costs and may negatively impact our ability to access the debt markets on favorable terms.

We have identified a material weakness in our internal control over financial reporting. If we are unable to develop and maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us; materially and adversely affect our business and operating results; and expose us to potential litigation.

~~A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement~~restricted shares of our ~~annual or interim consolidated financial statements will not be prevented or detected and corrected on a timely basis. The following material weakness remained unremediated as~~common stock issued to employees of ~~September 30, 2022:~~

•The Company did not design and maintain effective controls over the evaluation of complex transactions as a result of the error identified in the treatment of deemed dividends on redeemable preferred stock in arriving at net income (loss) attributable to common stockholders, which impacted the calculation of earnings per share.

~~Additionally, this material weakness could result in additional misstatements of the aforementioned accounts or disclosures that would result in an additional material misstatement~~our advisor pursuant to the ~~annual or interim consolidated financial statements that would not be prevented or detected.~~Company’s stockholder-approved stock incentive plan.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

5657

ITEM 4.MINE SAFETY DISCLOSURES

None.

ITEM 5.OTHER INFORMATION

Fourth Amended and Restated Bylaws

On August 4, 2023, the board of directors (the “Board”) of the Company approved amendments to the Fourth Amended and Restated Bylaws, as amended, of the Company (the “Bylaws”), effective immediately. The amendments to the Bylaws provide, among other things, that:

•the notice to be furnished to the Company by a stockholder seeking to bring a proposed director nomination before a meeting of the Company’s stockholders must include the information required pursuant to Rule 14a-19(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) if the stockholder intends to engage in a solicitation in support of director nominees other than the Company’s nominees;

•no stockholder may solicit proxies in support of any nominees other than individuals nominated by the Board unless such stockholder has complied with Rule 14a-19 under the Exchange Act in connection with the solicitation of such proxies, including the provision to the Company of notices required thereunder in a timely manner;

•if any stockholder provides notice pursuant to Rule 14a-19(b) under the Exchange Act and subsequently fails to comply with any of the requirements of Rule 14a-19 under the Exchange Act, then the Company will disregard any proxies or votes solicited for such stockholder’s nominee; and

•at the request of the Company, if any stockholder provides notice pursuant to Rule 14a-19(b) under the Exchange Act, such stockholder must deliver to the Company, no later than five business days prior to the applicable meeting of stockholders, reasonable evidence that such stockholder has met the requirements of Rule 14a-19 under the Exchange Act.

In addition, the amendments to the Bylaws include enhancements to certain advance notice procedures and disclosure requirements for a stockholder nomination of directors and the submission of proposals for consideration at annual meetings of the stockholders of the Company (other than proposals to be included in the Company’s proxy statement pursuant to Rule 14a-8 of the Exchange Act). The above summary does not purport to be complete and is qualified in its entirety by reference to the Fourth Amended and Restated Bylaws, as amended on August 4, 2023, a copy of which is filed as Exhibit 3.7 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Rule 10b5-1 Trading Agreements

During the three months ended June 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading agreement” or “non-Rule 10b5-1 trading agreement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 6.EXHIBITS


Exhibit						Description
3.1						Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 29, 2016) (File No. 001-35972).
3.2						Articles Supplementary of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on May 18, 2015) (File No. 001-35972).
3.3						Articles of Amendment of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on April 29, 2016) (File No. 001-35972).
3.4						Amendment Number One to the Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 8, 2017) (File No. 001-35972).
3.5						Amendment Number Two to Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 23, 2018) (File No. 001-35972).
3.6						Articles of Amendment of Braemar Hotels & Resorts Inc., accepted for record and certified by the SDAT on January 23, 2020 (incorporated by reference to Exhibit 3.13 to Amendment No. 1 to the Registration Statement on Form S-3 ~~(File No. 333-234663)~~ filed with the SEC on January 24, 2020) (File No. 333-234663).
~~3.7~~

3.7*						Fourth Amended and Restated Bylaws, as amended by Amendment No. 1 on March 17, 2022, by Amendment No. 2 on February 23, 2023 and by Amendment No. 3 on August 4, 2023, adopted on August 4, 2023.

Exhibit

Description

10.1

Limited Waiver Under Advisory Agreement, dated as of March ~~17, 2022.(incorporated~~2, 2023, by and among Braemar Hotels & Resorts Inc., Braemar Hospitality Limited Partnership, Braemar TRS Corporation, Ashford Inc., and Ashford Hospitality Advisors LLC (incorporated by referencetoExhibit~~3.2~~ 10.1 to the Current Report on Form 8-K filed on March ~~18, 2022)~~3, 2023) (File No. 001-35972).

10.2

Amendment No. 4 to the Braemar Hotels & Resorts, Inc. Second Amended and Restated 2013 Equity Incentive Plan (incorporated by reference to Annex B to the Company’s Proxy Statement on Schedule 14A filed March 28, 2023) (File No. 001-35972)

10.3

Credit Agreement, dated as of July 31, 2023, by and among Braemar Hospitality Limited Partnership, Braemar Hotels & Resorts Inc., the lenders party thereto and Bank of America, N.A.(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed August 1, 2023) (File No. 001-35972).

31.1*

Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended.

31.2*

Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended.

32.1**

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022~~2023 are formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements Comprehensive Income; (iv) Consolidated Statements of Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to the Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Submitted electronically with this report.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Submitted electronically with this report.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically with this report.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	Submitted electronically with this report.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	Submitted electronically with this report.
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

5759

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BRAEMAR HOTELS & RESORTS INC.

Date:

~~February 2,~~August 7, 2023

By:

/s/ RICHARD J. STOCKTON

Richard J. Stockton

President and Chief Executive Officer

Date:

~~February 2,~~August 7, 2023

By:

/s/ DERIC S. EUBANKS

Deric S. Eubanks

Chief Financial Officer

5860


	Nine Months Ended September 30, 2021
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Total
California	6	$	60,935	$	17,942	$	8,607	$	87,484

Colorado	1	12,058		8,344		6,058		26,460
Florida	2	47,964		18,732		15,311		82,007
Illinois	1	9,607		2,020		792		12,419
Pennsylvania	1	7,568		706		490		8,764
Washington	1	10,980		1,041		1,046		13,067
Washington, D.C.	1	5,711		767		832		7,310
USVI	1	40,897		11,424		7,303		59,624


Total	14	$	195,720	$	60,976	$	40,439	$	297,135


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	As Originally Reported		Adjustment		As Restated		As Originally Reported		Adjustment		As Restated
Condensed Consolidated Statement of Operations
Deemed dividend on redeemable preferred stock	$	—	$	(2,649)	$	(2,649)	$	—	$	(4,802)	$	(4,802)
Net income (loss) attributable to common stockholders	$	(14,068)	$	(2,649)	$	(16,717)	$	7,594	$	(4,802)	$	2,792
Income (loss) per share - basic:
Net income (loss) allocated to common stockholders per share	$	(0.20)	$	(0.04)	$	(0.24)	$	0.11	$	(0.07)	$	0.04
Income (loss) per share - diluted:
Net income (loss) allocated to common stockholders per share	$	(0.20)	$	(0.04)	$	(0.24)	$	0.11	$	(0.07)	$	0.04