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 SeptemberJune 30, 20222023
OR
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)
Maryland46-2488594
(State or other jurisdiction of incorporation or organization)(IRS employer identification number)
14185 Dallas Parkway
Suite 1200
Dallas
Texas75254
(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 filerAccelerated filer
Non-accelerated filerSmaller 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 classTrading Symbol(s)Name of each exchange on which registered
Common StockBHRNew York Stock Exchange
Preferred Stock, Series BBHR-PBNew York Stock Exchange
Preferred Stock, Series DBHR-PDNew 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 share66,971,06365,993,893
(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/A10-Q
FOR THE QUARTER ENDED SeptemberJune 30, 20222023

TABLE OF CONTENTS



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, 2022December 31, 2021June 30, 2023December 31, 2022
ASSETSASSETSASSETS
Investments in hotel properties, grossInvestments in hotel properties, gross$2,055,773 $1,845,078 Investments in hotel properties, gross$2,360,842 $2,325,093 
Accumulated depreciationAccumulated depreciation(431,303)(399,481)Accumulated depreciation(470,484)(440,492)
Investments in hotel properties, netInvestments in hotel properties, net1,624,470 1,445,597 Investments in hotel properties, net1,890,358 1,884,601 
Cash and cash equivalentsCash and cash equivalents358,878 215,998 Cash and cash equivalents128,025 261,541 
Restricted cashRestricted cash53,932 47,376 Restricted cash63,439 54,155 
Accounts receivable, net of allowance of $197 and $134, respectively27,158 23,701 
Accounts receivable, net of allowance of $200 and $339, respectivelyAccounts receivable, net of allowance of $200 and $339, respectively32,864 51,448 
InventoriesInventories4,540 3,128 Inventories5,119 5,238 
Prepaid expensesPrepaid expenses8,841 4,352 Prepaid expenses18,172 7,044 
Deferred costs, netDeferred costs, net75 — 
Investment in unconsolidated entityInvestment in unconsolidated entity1,797 1,689 Investment in unconsolidated entity1,699 1,689 
Derivative assetsDerivative assets5,255 139 Derivative assets6,308 6,482 
Operating lease right-of-use assetsOperating lease right-of-use assets79,719 80,462 Operating lease right-of-use assets78,917 79,449 
Other assetsOther assets17,489 23,588 Other assets17,078 14,621 
Intangible assets, netIntangible assets, net3,977 4,261 Intangible assets, net3,693 3,883 
Due from related parties, netDue from related parties, net1,097 1,770 Due from related parties, net333 938 
Due from third-party hotel managersDue from third-party hotel managers22,941 27,461 Due from third-party hotel managers15,430 26,625 
Total assetsTotal assets$2,210,094 $1,879,522 Total assets$2,261,510 $2,397,714 
LIABILITIES AND EQUITYLIABILITIES AND EQUITYLIABILITIES AND EQUITY
Liabilities:Liabilities:Liabilities:
Indebtedness, netIndebtedness, net$1,236,864 $1,172,678 Indebtedness, net$1,135,958 $1,334,130 
Accounts payable and accrued expensesAccounts payable and accrued expenses122,150 96,316 Accounts payable and accrued expenses135,096 133,978 
Dividends and distributions payableDividends and distributions payable4,353 2,173 Dividends and distributions payable8,917 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 managersDue to third-party hotel managers1,514 610 Due to third-party hotel managers1,579 2,096 
Operating lease liabilitiesOperating lease liabilities60,771 60,937 Operating lease liabilities60,538 60,692 
Other liabilitiesOther liabilities20,265 20,034 Other liabilities22,508 22,343 
Derivative liabilitiesDerivative liabilities440 1,435 Derivative liabilities165 284 
Total liabilitiesTotal liabilities1,455,248 1,355,657 Total liabilities1,369,319 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, 202165,426 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, respectively204,252 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, respectively26,274 715 
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, respectively5.50% 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, respectively65,426 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, respectivelySeries 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, respectively379,403 291,076 
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, respectivelySeries 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, respectively48,405 35,182 
Redeemable noncontrolling interests in operating partnershipRedeemable noncontrolling interests in operating partnership40,635 36,087 Redeemable noncontrolling interests in operating partnership35,174 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, 202116 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, respectively714 653 
8.25% Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2023 and December 31, 20228.25% Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2023 and December 31, 202216 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, respectivelyCommon 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, respectively659 699 
Additional paid-in capitalAdditional paid-in capital739,394 707,418 Additional paid-in capital716,987 734,134 
Accumulated deficitAccumulated deficit(307,745)(309,240)Accumulated deficit(341,210)(324,740)
Total stockholders’ equity of the CompanyTotal stockholders’ equity of the Company432,379 398,847 Total stockholders’ equity of the Company376,452 410,109 
Noncontrolling interest in consolidated entitiesNoncontrolling interest in consolidated entities(14,120)(16,549)Noncontrolling interest in consolidated entities(12,669)(16,346)
Total equityTotal equity418,259 382,298 Total equity363,783 393,763 
Total liabilities and equityTotal 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.
2

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,
2022202120222021Three Months Ended June 30,Six Months Ended June 30,
(restated)(restated)2023202220232022
REVENUEREVENUEREVENUE
RoomsRooms$104,503 $77,560 $322,222 $195,720 Rooms$117,137 $112,527 $254,664 $217,719 
Food and beverageFood and beverage37,624 24,494 116,600 60,976 Food and beverage47,776 42,269 100,004 78,976 
OtherOther19,062 14,123 59,141 40,439 Other21,794 20,098 47,340 40,079 
Total hotel revenueTotal hotel revenue161,189 116,177 497,963 297,135 Total hotel revenue186,707 174,894 402,008 336,774 
EXPENSESEXPENSESEXPENSES
Hotel operating expenses:Hotel operating expenses:Hotel operating expenses:
RoomsRooms25,424 17,072 69,742 41,569 Rooms26,705 24,134 54,063 44,318 
Food and beverageFood and beverage31,320 20,252 91,242 50,526 Food and beverage36,365 31,894 76,104 59,922 
Other expensesOther expenses50,836 36,124 149,130 98,143 Other expenses56,297 52,087 118,592 98,294 
Management feesManagement fees5,116 3,595 14,802 9,079 Management fees5,880 5,538 12,585 9,686 
Total hotel operating expensesTotal hotel operating expenses112,696 77,043 324,916 199,317 Total hotel operating expenses125,247 113,653 261,344 212,220 
Property taxes, insurance and otherProperty taxes, insurance and other8,851 12,622 22,731 27,076 Property taxes, insurance and other9,396 5,277 17,512 13,880 
Depreciation and amortizationDepreciation and amortization19,604 18,284 57,616 54,881 Depreciation and amortization22,567 19,571 45,088 38,012 
Advisory services feeAdvisory services fee8,854 4,809 22,481 16,343 Advisory services fee8,215 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 administrativeCorporate general and administrative8,075 2,094 14,008 6,077 Corporate general and administrative3,896 3,438 6,716 5,933 
Total expenses158,080 115,127 441,638 303,276 
Gain (loss) on insurance settlement and disposition of assets— — — 696 
Total operating expensesTotal operating expenses169,321 148,130 346,823 283,558 
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 entityEquity in earnings (loss) of unconsolidated entity(74)(68)(220)(198)Equity in earnings (loss) of unconsolidated entity(75)(74)(148)(146)
Interest incomeInterest income745 13 932 34 Interest income2,295 162 4,403 187 
Other income (expense)27 — 27 — 
Interest expense and amortization of discounts and loan costsInterest 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 feesWrite-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 derivatives2,403 142 4,019 64 
Gain (loss) on extinguishment of debtGain (loss) on extinguishment of debt— — 2,318 — 
Realized and unrealized gain (loss) on derivativesRealized and unrealized gain (loss) on derivatives1,029 1,208 695 1,616 
INCOME (LOSS) BEFORE INCOME TAXESINCOME (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) benefitIncome tax (expense) benefit(95)(560)(3,783)(766)Income tax (expense) benefit75 (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 entities367 (1,468)58 (1,442)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnershipNet (income) loss attributable to redeemable noncontrolling interests in operating partnership1,166 823 (647)3,184 Net (income) loss attributable to redeemable noncontrolling interests in operating partnership925 (846)664 (1,813)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANYNET 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 dividendsPreferred 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 stockDeemed dividends on preferred stock(301)— (2,755)— 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERSNET 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)$21,662 
INCOME (LOSS) PER SHARE - BASIC:INCOME (LOSS) PER SHARE - BASIC:INCOME (LOSS) PER SHARE - BASIC:
Net income (loss) attributable to common stockholdersNet income (loss) attributable to common stockholders$(0.24)$(0.15)$0.04 $(0.73)Net income (loss) attributable to common stockholders$(0.20)$0.14 $(0.14)$0.31 
Weighted average common shares outstanding – basicWeighted average common shares outstanding – basic70,956 59,207 69,213 48,954 Weighted average common shares outstanding – basic65,806 70,740 68,378 68,325 
INCOME (LOSS) PER SHARE - DILUTED:INCOME (LOSS) PER SHARE - DILUTED:INCOME (LOSS) PER SHARE - DILUTED:
Net income (loss) attributable to common stockholdersNet income (loss) attributable to common stockholders$(0.24)$(0.15)$0.04 $(0.73)Net income (loss) attributable to common stockholders$(0.20)$0.12 $(0.14)$0.27 
Weighted average common shares outstanding – dilutedWeighted average common shares outstanding – diluted70,956 59,207 69,214 48,954 Weighted average common shares outstanding – diluted65,806 107,669 68,378 98,798 
See Notes to Condensed Consolidated Financial Statements.
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Table of Contents
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
NET INCOME (LOSS)NET INCOME (LOSS)$(8,383)$(8,219)$23,901 $(30,617)NET INCOME (LOSS)$(3,138)$16,680 $13,466 $32,284 
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXOTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXOTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Total other comprehensive income (loss)Total other comprehensive income (loss)— — — — Total other comprehensive income (loss)— — — — 
TOTAL COMPREHENSIVE INCOME (LOSS)TOTAL COMPREHENSIVE INCOME (LOSS)(8,383)(8,219)23,901 (30,617)TOTAL COMPREHENSIVE INCOME (LOSS)(3,138)16,680 13,466 32,284 
Comprehensive (income) loss attributable to noncontrolling interest in consolidated entitiesComprehensive (income) loss attributable to noncontrolling interest in consolidated entities(823)450 (2,265)2,546 Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities367 (1,468)58 (1,442)
Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnershipComprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership1,166 823 (647)3,184 Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership925 (846)664 (1,813)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANYCOMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY$(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.
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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 StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitNoncontrolling Interest in Consolidated EntitiesTotal
5.50% Series B Cumulative Convertible
Preferred Stock
Series E Redeemable
Preferred Stock
Series M Redeemable
Preferred Stock
Redeemable Noncontrolling Interests in Operating Partnership8.25% Series D Cumulative Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitNoncontrolling Interest in Consolidated EntitiesTotal
5.50% Series B Cumulative Convertible
Preferred Stock
Series E Redeemable
Preferred Stock
Series M Redeemable
Preferred Stock
Redeemable Noncontrolling Interests in Operating Partnership
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountRedeemable Noncontrolling Interests in Operating PartnershipSharesAmountSharesAmountAdditional
Paid-in
Capital
SharesTotalSharesAmountSharesAmountRedeemable Noncontrolling Interests in Operating Partnership
Balance at June 30, 20221,600 $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, 2023Balance at March 31, 20231,600 $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 stockPurchase of common stock— — (156)(1)(760)— — (761)— — — — — — — Purchase of common stock— — (1)— (4)— — (4)— — — — — — — 
Equity-based compensationEquity-based compensation— — — — 1,799 — — 1,799 — — — — — — 1,592 Equity-based compensation— — — — 1,262 — — 1,262 — — — — — — 1,752 
Issuance of restricted shares/unitsIssuance of restricted shares/units— — 304 — — — — — — — — — Issuance of restricted shares/units— — 45 — — — — — — — — — — — — 
Forfeiture of restricted common shares— — (2)— — — — — — — — — — — — 
Issuance of preferred stockIssuance of preferred stock— — — — — — — — — — 4,375 98,277 673 16,296 — Issuance of preferred stock— — — — — — — — — — 32 828 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 interestsContributions from noncontrolling interests— — — — — — 2,026 2,026 — — — — — — — 
Distributions to noncontrolling interestsDistributions to noncontrolling interests— — — — — — — — — — — — — — (84)Distributions to noncontrolling interests— — — — — — (315)(315)— — — — — — (361)
Redemption/conversion of operating partnership unitsRedemption/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 stockRedemption of preferred stock— — — — — — — — — — (21)(507)(4)(90)— 
Redemption value adjustment – preferred stockRedemption value adjustment – preferred stock— — — — — (301)— (301)— — — 176 — 125 — 
Redemption value adjustmentRedemption value adjustment— — — — — (2)— (2)— — — — — — Redemption value adjustment— — — — — (11)— (11)— — — — — — 11 
Balance at September 30, 20221,600 $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, 2023Balance at June 30, 20231,600 $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 StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitNoncontrolling Interest in Consolidated EntitiesTotal
5.50% Series B Cumulative Convertible
Preferred Stock
Series E Redeemable
Preferred Stock
Series M Redeemable
Preferred Stock
Redeemable Noncontrolling Interests in Operating Partnership
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 20211,600 $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 — — — — — — — — — 
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, 20221,600 $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 StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitNoncontrolling Interest in Consolidated EntitiesTotal
5.50% Series B Cumulative Convertible
Preferred Stock
Series E Redeemable
Preferred Stock
Series M Redeemable
Preferred Stock
Redeemable Noncontrolling Interests in Operating Partnership
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 20221,600 $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)— — — — — — 
Balance at June 30, 20231,600 $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 
5

Table of Contents
8.25% Series D Cumulative Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitNoncontrolling Interest in Consolidated EntitiesTotal
5.50% Series B Cumulative Convertible
 Preferred Stock
 Series E Redeemable
 Preferred Stock
Series M Redeemable
 Preferred Stock
Redeemable Noncontrolling Interests in Operating Partnership8.25% Series D Cumulative Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitNoncontrolling Interest in Consolidated EntitiesTotal
5.50% Series B Cumulative Convertible
 Preferred Stock
 Series E Redeemable
 Preferred Stock
Series M Redeemable
 Preferred Stock
Redeemable Noncontrolling Interests in Operating Partnership
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountRedeemable Noncontrolling Interests in Operating PartnershipSharesAmountSharesAmountAdditional
Paid-in
Capital
SharesTotalSharesAmountSharesAmountRedeemable Noncontrolling Interests in Operating Partnership
Balance at June 30, 20211,600 $16 57,311 $573 $661,576 $(295,641)$(16,264)$350,260 3,108 $66,064 — $— — $29,398 
Balance at March 31, 2022Balance at March 31, 20221,600 $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 stockPurchase of common stock— — — — — — — — — — — — — 
Equity-based compensationEquity-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 costsCommon stock issuance costs— — — — (27)— — (27)— — — — — — — 
Issuance of restricted shares/unitsIssuance of restricted shares/units— — 45 — — — — — — — — — — — — 
Forfeiture of restricted common sharesForfeiture of restricted common shares— — (7)— — — — — — — — — — — — Forfeiture of restricted common shares— — (5)— — — — — — — — — — — — 
Issuance of preferred stockIssuance 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 interestsDistributions 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 stockRedemption of preferred stock— — — — — — — — — — (2)(50)— — — 
Redemption value adjustment – preferred stockRedemption value adjustment – preferred stock— — — — — (1,160)— (1,160)— — — 951 — 209 — 
Redemption value adjustmentRedemption value adjustment— — — — — 2,856 — 2,856 — — — — — — (2,856)Redemption value adjustment— — — — — 4,594 — 4,594 — — — — — — (4,594)
Balance at September 30, 20211,600 $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, 2022Balance at June 30, 20221,600 $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 StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitNoncontrolling Interest in Consolidated EntitiesTotal5.50% Series B Cumulative Convertible Preferred StockSeries E Redeemable Preferred StockSeries M Redeemable Preferred StockRedeemable Noncontrolling Interests in Operating Partnership
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 20201,600 $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)— — — — — — — — — — 
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— — — 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, 20211,600 $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 StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitNoncontrolling Interest in Consolidated EntitiesTotal5.50% Series B Cumulative Convertible Preferred StockSeries E Redeemable Preferred StockSeries M Redeemable Preferred StockRedeemable Noncontrolling Interests in Operating Partnership
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 20211,600 $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, 20221,600 $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.
6

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,
2022202120232022
CASH FLOWS FROM OPERATING ACTIVITIESCASH FLOWS FROM OPERATING ACTIVITIESCASH 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 amortizationDepreciation and amortization57,616 54,881 Depreciation and amortization45,088 38,012 
Equity-based compensationEquity-based compensation8,941 7,265 Equity-based compensation5,227 5,550 
Bad debt expenseBad debt expense727 208 Bad debt expense327 560 
(Gain) loss on extinguishment of debt(Gain) loss on extinguishment of debt(2,318)— 
Amortization of loan costs, discounts and capitalized default interestAmortization of loan costs, discounts and capitalized default interest(525)(550)Amortization of loan costs, discounts and capitalized default interest868 (246)
Write-off of loan costs and exit feesWrite-off of loan costs and exit fees106 1,960 Write-off of loan costs and exit fees260 98 
Amortization of intangiblesAmortization of intangibles356 394 Amortization of intangibles237 237 
Amortization of non-refundable membership initiation feesAmortization 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 depositsInterest expense accretion on refundable membership club deposits545 582 Interest expense accretion on refundable membership club deposits342 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 derivativesRealized and unrealized (gain) loss on derivatives(695)(1,616)
Equity in (earnings) loss of unconsolidated entityEquity in (earnings) loss of unconsolidated entity220 198 Equity in (earnings) loss of unconsolidated entity148 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 inventoriesAccounts receivable and inventories443 (4,079)Accounts receivable and inventories18,215 (5,069)
Prepaid expenses and other assetsPrepaid expenses and other assets(5,745)311 Prepaid expenses and other assets(13,448)(1,464)
Accounts payable and accrued expensesAccounts payable and accrued expenses8,013 31,131 Accounts payable and accrued expenses(9,664)(202)
Operating lease right-of-use assetsOperating lease right-of-use assets436 416 Operating lease right-of-use assets295 296 
Due to/from related parties, netDue to/from related parties, net673 (919)Due to/from related parties, net605 702 
Due to/from third-party hotel managersDue to/from third-party hotel managers5,692 (7,365)Due to/from third-party hotel managers10,678 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 liabilitiesOperating lease liabilities(215)(184)Operating lease liabilities(154)(147)
Other liabilitiesOther liabilities836 2,755 Other liabilities662 898 
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities103,986 55,147 Net cash provided by (used in) operating activities61,963 79,837 
CASH FLOWS FROM INVESTING ACTIVITIESCASH FLOWS FROM INVESTING ACTIVITIESCASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from property insuranceProceeds from property insurance36 — Proceeds from property insurance327 36 
Net proceeds from disposition of assets— 1,816 
Payments for initial franchise feePayments for initial franchise fee(75)— 
Acquisition of hotel properties, net of cash and restricted cash acquiredAcquisition 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 entityInvestment in unconsolidated entity(328)(117)Investment in unconsolidated entity(158)(164)
Improvements and additions to hotel propertiesImprovements 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 activitiesNet 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 ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on indebtednessBorrowings on indebtedness70,500 83,231 Borrowings on indebtedness— 70,500 
Repayments of indebtednessRepayments of indebtedness(68,250)(83,770)Repayments of indebtedness(196,355)(68,000)
Payments of loan costs and exit feesPayments of loan costs and exit fees(1,847)(1,895)Payments of loan costs and exit fees(790)(1,728)
Payments for derivativesPayments for derivatives(2,092)(200)Payments for derivatives(3,400)(1,145)
Proceeds from derivativesProceeds from derivatives4,010 — 
Purchase of common stockPurchase of common stock(1,307)(376)Purchase of common stock(19,306)(547)
Payments for dividends and distributionsPayments for dividends and distributions(12,981)(6,882)Payments for dividends and distributions(26,139)(7,334)
Proceeds from issuance of preferred stock185,176 4,586 
Proceeds from issuance of common stock— 100,024 
Net proceeds from issuance of preferred stockNet proceeds from issuance of preferred stock97,930 71,016 
Common stock offering costsCommon stock offering costs(102)— Common stock offering costs— (102)
Contributions from noncontrolling interest in consolidated entitiesContributions from noncontrolling interest in consolidated entities164 920 Contributions from noncontrolling interest in consolidated entities4,050 164 
Redemption of operating partnership unitsRedemption of operating partnership units(7,162)— 
Distributions to noncontrolling interest in consolidated entitiesDistributions to noncontrolling interest in consolidated entities(2,024)— 
Redemption of preferred stockRedemption of preferred stock(193)— Redemption of preferred stock(904)(50)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities169,068 95,638 Net cash provided by (used in) financing activities(150,090)62,774 
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash149,436 127,120 Net change in cash, cash equivalents and restricted cash(124,232)35,775 
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period263,374 113,150 Cash, cash equivalents and restricted cash at beginning of period315,696 263,374 
Cash, cash equivalents and restricted cash at end of periodCash, 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 
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Nine Months Ended September 30,Six Months Ended June 30,
2022202120232022
SUPPLEMENTAL CASH FLOW INFORMATIONSUPPLEMENTAL CASH FLOW INFORMATIONSUPPLEMENTAL CASH FLOW INFORMATION
Interest paidInterest 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 ACTIVITIESSUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIESSUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Dividends and distributions declared but not paidDividends 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— 
Issuance of common units for hotel acquisition— 13,175 
Issuance of warrants in hotel acquisition— 1,528 
Assumption of debt in hotel acquisitionAssumption of debt in hotel acquisition58,601 49,815 Assumption of debt in hotel acquisition— 58,601 
Capital expenditures accrued but not paidCapital expenditures accrued but not paid6,746 2,094 Capital expenditures accrued but not paid21,011 5,363 
Issuance of common stock for hotel acquisitionIssuance of common stock for hotel acquisition35,040 — Issuance of common stock for hotel acquisition— 35,040 
Accrued common stock offering expense— 147 
Accrued preferred stock offering expensesAccrued preferred stock offering expenses53 132 Accrued preferred stock offering expenses— 105 
Non-cash preferred stock dividendsNon-cash preferred stock dividends639 — Non-cash preferred stock dividends1,747 278 
Non-cash common stock dividends— 
Unsettled proceeds from derivativesUnsettled proceeds from derivatives470 — 
SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASHSUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASHSUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of periodCash 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 periodRestricted cash at beginning of period47,376 34,544 Restricted cash at beginning of period54,155 47,376 
Cash, cash equivalents and restricted cash at beginning of periodCash, 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 periodCash 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 periodRestricted cash at end of period53,932 44,753 Restricted cash at end of period63,439 48,117 
Cash, cash equivalents and restricted cash at end of periodCash, 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.
8


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” refersrefer 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 SeptemberJune 30, 2022,2023, own 1516 hotel properties in sixseven 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 3,9714,192 total rooms, or 3,7363,957 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 SeptemberJune 30, 2022, 142023, 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 SeptemberJune 30, 2022, 122023, 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
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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 20212022 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:
historicalHistorical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and ninesix months ended SeptemberJune 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 hotelthe 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 AugustMarch 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 simplifiesprovides optional guidance through December 31, 2022 to ease the potential burden in accounting for, certainor recognizing the effects of, reference rate reform on financial instruments with characteristics of liabilities and equity. This ASU: (1) simplifiesreporting. 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 beginningreference 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 yearFASB issued ASU 2022-06, Reference Rate Reform (Topic 848) (“ASU 2022-06”), which deferred the sunset date of adoption and cannot adoptTopic 848 from December 31, 2022 to December 31, 2024. The Company applied the guidanceoptional 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 recordedstandards 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.
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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, 2022Three Months Ended June 30, 2023
Primary Geographical MarketPrimary Geographical MarketNumber of HotelsRoomsFood and BeverageOther HotelTotalPrimary Geographical MarketNumber of HotelsRoomsFood and BeverageOther HotelTotal
CaliforniaCalifornia6$37,827 $12,045 $4,992 $54,864 California6$31,004 $10,630 $5,066 $46,700 
Puerto RicoPuerto Rico18,190 3,659 2,462 14,311 Puerto Rico112,870 5,060 3,087 21,017 
ArizonaArizona17,924 5,268 2,043 15,235 
ColoradoColorado14,214 4,572 2,134 10,920 Colorado11,866 1,811 1,689 5,366 
FloridaFlorida213,480 5,723 5,368 24,571 Florida215,290 8,630 5,665 29,585 
IllinoisIllinois18,165 2,371 493 11,029 Illinois17,738 1,947 412 10,097 
PennsylvaniaPennsylvania16,023 1,026 373 7,422 Pennsylvania17,643 1,650 349 9,642 
WashingtonWashington18,239 1,223 385 9,847 Washington18,193 1,337 411 9,941 
Washington, D.C.Washington, D.C.17,745 3,327 533 11,605 Washington, D.C.111,433 5,721 426 17,580 
USVIUSVI110,620 3,678 2,322 16,620 USVI113,176 5,722 2,646 21,544 
TotalTotal15$104,503 $37,624 $19,062 $161,189 Total16$117,137 $47,776 $21,794 $186,707 
Three Months Ended September 30, 2021Three Months Ended June 30, 2022
Primary Geographical MarketPrimary Geographical MarketNumber of HotelsRoomsFood and BeverageOther HotelTotalPrimary Geographical MarketNumber of HotelsRoomsFood and BeverageOther HotelTotal
CaliforniaCalifornia6$28,838 $8,024 $3,626 $40,488 California6$34,313 $11,560 $4,226 $50,099 
Puerto RicoPuerto Rico111,927 4,700 2,908 19,535 
ColoradoColorado14,123 4,152 2,168 10,443 Colorado12,306 2,713 1,633 6,652 
FloridaFlorida213,738 5,384 4,581 23,703 Florida219,631 9,742 6,589 35,962 
IllinoisIllinois15,233 1,196 389 6,818 Illinois17,542 2,209 411 10,162 
PennsylvaniaPennsylvania13,911 580 243 4,734 Pennsylvania16,158 1,120 309 7,587 
WashingtonWashington16,906 792 550 8,248 Washington15,587 887 316 6,790 
Washington, D.C.Washington, D.C.12,476 512 337 3,325 Washington, D.C.19,719 3,403 572 13,694 
USVIUSVI112,335 3,854 2,229 18,418 USVI115,344 5,935 3,134 24,413 
TotalTotal14$77,560 $24,494 $14,123 $116,177 Total15$112,527 $42,269 $20,098 $174,894 
Six Months Ended June 30, 2023
Primary Geographical MarketNumber of HotelsRoomsFood and BeverageOther HotelTotal
California6$65,570 $21,940 $10,756 $98,266 
Puerto Rico128,300 9,935 6,224 44,459 
Arizona122,081 11,786 4,659 38,526 
Colorado116,207 8,172 4,672 29,051 
Florida236,939 19,129 12,336 68,404 
Illinois111,304 2,930 767 15,001 
Pennsylvania112,163 2,646 631 15,440 
Washington112,414 2,037 823 15,274 
Washington, D.C.120,210 11,209 859 32,278 
USVI129,476 10,220 5,613 45,309 
Total16$254,664 $100,004 $47,340 $402,008 
Six Months Ended June 30, 2022
Primary Geographical MarketNumber of HotelsRoomsFood and BeverageOther HotelTotal
California6$65,284 $22,429 $9,169 $96,882 
Puerto Rico117,403 5,832 3,796 27,031 
Colorado114,483 8,846 4,764 28,093 
Florida244,714 19,264 13,632 77,610 
Illinois110,301 3,006 740 14,047 
Pennsylvania19,233 1,626 520 11,379 
Washington18,175 1,298 625 10,098 
Washington, D.C.113,600 5,733 992 20,325 
USVI134,526 10,942 5,841 51,309 
Total15$217,719 $78,976 $40,079 $336,774 
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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Nine Months Ended September 30, 2022
Primary Geographical MarketNumber of HotelsRoomsFood and BeverageOther HotelTotal
California6$103,111 $34,474 $14,161 $151,746 
Puerto Rico125,593 9,491 6,258 41,342 
Colorado118,697 13,418 6,898 39,013 
Florida258,194 24,987 19,000 102,181 
Illinois118,466 5,377 1,233 25,076 
Pennsylvania115,256 2,652 893 18,801 
Washington116,414 2,521 1,010 19,945 
Washington, D.C.121,345 9,060 1,525 31,930 
USVI145,146 14,620 8,163 67,929 
Total15$322,222 $116,600 $59,141 $497,963 
Nine Months Ended September 30, 2021
Primary Geographical MarketNumber of HotelsRoomsFood and BeverageOther HotelTotal
California6$60,935 $17,942 $8,607 $87,484 
Colorado112,058 8,344 6,058 26,460 
Florida247,964 18,732 15,311 82,007 
Illinois19,607 2,020 792 12,419 
Pennsylvania17,568 706 490 8,764 
Washington110,980 1,041 1,046 13,067 
Washington, D.C.15,711 767 832 7,310 
USVI140,897 11,424 7,303 59,624 
Total14$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, 2022December 31, 2021June 30, 2023December 31, 2022
LandLand$560,241 $480,530 Land$630,842 $630,489 
Buildings and improvementsBuildings and improvements1,329,102 1,215,810 Buildings and improvements1,520,184 1,511,949 
Furniture, fixtures and equipmentFurniture, fixtures and equipment132,386 123,954 Furniture, fixtures and equipment157,626 147,019 
Construction in progressConstruction in progress21,298 12,038 Construction in progress39,444 22,890 
ResidencesResidences12,746 12,746 Residences12,746 12,746 
Total costTotal cost2,055,773 1,845,078 Total cost2,360,842 2,325,093 
Accumulated depreciationAccumulated depreciation(431,303)(399,481)Accumulated depreciation(470,484)(440,492)
Investments in hotel properties, netInvestments 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 ninesix months ended SeptemberJune 30, 20222023 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,
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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 improvements102,105 
Furniture, fixtures and equipment15,405 
Investments in hotel properties197,221 
Restricted cash1,091 
Inventories1,184 
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, 2022Nine 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 investmentequity 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 ninesix months ended SeptemberJune 30, 20222023 and 2021.2022.
The following table summarizes our carrying value and ownership interest in OpenKey:
September 30, 2022December 31, 2021June 30, 2023December 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 $1,689 
Ownership interest in OpenKeyOwnership interest in OpenKey7.9 %7.8 %Ownership interest in OpenKey7.9 %7.9 %
The following table summarizes our equity in earnings (loss) in OpenKey (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
Line Item2023202220232022
Equity in earnings (loss) of unconsolidated entity$(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 ItemJune 30, 2023December 31, 2022
Investment in unconsolidated entity$164 $— 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following table summarizes our equity in earnings (loss) inthe 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 ItemLine Item2022202120222021Line Item20232023
Equity in earnings (loss) of unconsolidated entityEquity in earnings (loss) of unconsolidated entity$(74)$(68)$(220)$(198)Equity in earnings (loss) of unconsolidated entity$$
6. Indebtedness, net
Indebtedness, netconsisted of the following (dollars in thousands):
IndebtednessIndebtednessCollateralCurrent Maturity
Final
Maturity (10)
Interest RateSeptember 30, 2022December 31, 2021IndebtednessCollateralCurrent Maturity
Final
Maturity (11)
Interest RateJune 30, 2023December 31, 2022
Mortgage loan (3)
Mortgage loan (3)
Park Hyatt Beaver Creek Resort & SpaApril 2022April 2022
LIBOR (1) +3.00%
$— $67,500 
Mortgage loan (3)
The Ritz-Carlton SarasotaApril 2023April 2023
LIBOR (1) + 2.65%
$— $98,500 
Mortgage loan (4)
Mortgage loan (4)
Hotel YountvilleMay 2023May 2023
LIBOR (1) + 2.55%
— 51,000 
Mortgage loanMortgage loanBardessono Hotel and SpaAugust 2023August 2023
SOFR (2) + 2.65%
40,000 40,000 
Mortgage loan (5)
Mortgage loan (5)
The Ritz-Carlton St. ThomasAugust 2023August 2024
LIBOR (1) + 3.95%
42,500 42,500 
Mortgage loan (3)
Mortgage loan (3)
The Ritz-Carlton SarasotaOctober 2023April 2024
SOFR (2) + 3.60%
98,000 — 
Mortgage loan (4)
Mortgage loan (4)
Hotel YountvilleNovember 2023May 2024
SOFR (2) + 2.65%
51,000 — 
Mortgage loanMortgage loanThe Ritz-Carlton Lake TahoeJanuary 2024January 2024
SOFR (2) + 2.20%
54,000 54,000 
Mortgage loanMortgage loanCapital HiltonFebruary 2024February 2024
LIBOR (1) + 1.70%
195,000 195,000 
Hilton La Jolla Torrey Pines
Mortgage loan (4)
The Ritz-Carlton SarasotaApril 2023April 2023
LIBOR (1) + 2.65%
98,750 99,500 
Mortgage loan (4)
Hotel YountvilleMay 2023May 2023
LIBOR (1) + 2.55%
51,000 51,000 
Mortgage loan (5)
The Notary HotelJune 2023June 2025
LIBOR (1) + 2.16%
435,000 435,000 
Mortgage loan (4)(6)
Mortgage loan (4)(6)
Park Hyatt Beaver Creek Resort & SpaFebruary 2024February 2027
SOFR (2) + 2.86%
70,500 70,500 
Mortgage loan(7)
Mortgage loan(7)
The Ritz-Carlton Reserve Dorado BeachMarch 2024March 2026
LIBOR (1) + 6.00%
— 54,000 
Mortgage loan (8)
Mortgage loan (8)
The Notary HotelJune 2024June 2025
LIBOR (1) + 2.61%
293,180 435,000 
The ClancyThe Clancy
Sofitel Chicago Magnificent MileSofitel Chicago Magnificent Mile
Marriott Seattle WaterfrontMarriott Seattle Waterfront
Mortgage loan (4)
Bardessono Hotel and SpaAugust 2023August 2023
LIBOR (1) + 2.55%
40,000 40,000 
Mortgage loan (6)
The Ritz-Carlton St. ThomasAugust 2023August 2024
LIBOR (1) + 3.95%
42,500 42,500 
Mortgage loan (4)(6)
The Ritz-Carlton Lake TahoeJanuary 2024January 2024
LIBOR (1) + 2.10%
54,000 54,000 
Mortgage loan(7)
Capital HiltonFebruary 2024February 2024
LIBOR (1) + 1.70%
195,000 195,000 
Hilton La Jolla Torrey Pines
Mortgage loan (3)
Park Hyatt Beaver Creek Resort & SpaFebruary 2024February 2027
SOFR (2) + 2.86%
70,500 — 
Mortgage loan (7)
The Ritz-Carlton Reserve Dorado BeachMarch 2024March 2026
LIBOR (1) + 6.00%
54,000 — 
Mortgage loan (8)
Mr. C Beverly Hills HotelAugust 2024August 2024
LIBOR (1) + 3.60%
30,000 30,000 
Mortgage loan (4) (9)
Pier House Resort & SpaSeptember 2024September 2024
LIBOR (1) + 1.85%
— 80,000 
Mortgage loan (9)
Mortgage loan (9)
Pier House Resort & SpaSeptember 2024September 2024
SOFR (2) + 1.95%
80,000 — 
Mortgage loan (9)
Mr. C Beverly Hills HotelAugust 2024August 2024
LIBOR (1) + 3.60%
30,000 30,000 
Mortgage loanMortgage loanPier House Resort & SpaSeptember 2024September 2024
SOFR (2) + 1.95%
80,000 80,000 
Mortgage loan (10)
Mortgage loan (10)
Four Seasons Resort ScottsdaleDecember 2025December 2027
SOFR (2) + 3.75%
100,000 100,000 
Convertible Senior NotesConvertible Senior NotesEquityJune 2026June 20264.50%86,250 86,250 Convertible Senior NotesEquityJune 2026June 20264.50%86,250 86,250 
1,237,000 1,180,750 1,140,430 1,336,750 
Capitalized default interest and late charges, netCapitalized default interest and late charges, net2,400 3,904 Capitalized default interest and late charges, net1,046 1,934 
Deferred loan costs, netDeferred loan costs, net(3,455)(3,538)Deferred loan costs, net(3,616)(5,054)
Premiums/(Discounts), net919 (8,438)
Premiums/(discounts), netPremiums/(discounts), net(1,902)500 
Indebtedness, netIndebtedness, 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 SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.
(2)SOFR rate was 3.042%rates were 5.14% and 4.36% at SeptemberJune 30, 2022.2023 and December 31, 2022, respectively.
(3)On February 2, 2022,April 4, 2023, we refinancedamended 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 toloan. Terms of the satisfaction of certain conditions. The new mortgage loan isamendment 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-year2.75%, extended the current maturity date to October 2023, and added one six-month extension options,option, subject to satisfaction of certain conditions, of whichconditions. Effective June 1, 2023, the third was exercisedvariable 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 twothree 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 thisThis mortgage loan. Termsloan 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 extensionsextension 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
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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 amortizationthat was amortized was approximately $420,000 and $888,000, respectively, for the three and ninesix months ended SeptemberJune 30, 2022 was $481,000 and $1.5 million, respectively.2023. For the three and ninesix months ended SeptemberJune 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 withJanuary 18, 2023, the acquisition ofCompany 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 millionsix 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. TheFor the three and six months ended June 30, 2023, the Company recorded coupon interest expense of $970,000 and $2.9$1.9 million, forrespectively. For the three and ninesix months ended SeptemberJune 30, 2022, respectively. Thethe Company also recorded coupon interest expense of $970,000 and $1.4$1.9 million, forrespectively.
For the three and ninesix months ended SeptemberJune 30, 2021, respectively.
Upon issuance of2023, 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 ninesix months ended SeptemberJune 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.
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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 SeptemberJune 30, 2022,2023, we were in compliance with all covenants.
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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)
20222021
Interest rate caps:(1)
20232022
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 rangeStrike rate low end of range3.50 %0.75 %Strike rate low end of range3.50 %3.50 %
Strike rate high end of rangeStrike rate high end of range4.00 %4.00 %Strike rate high end of range5.25 %4.00 %
Effective date rangeEffective date rangeFebruary 2022 - September 2022January 2021 - September 2021Effective date rangeJanuary 2023 - June 2023February 2022-May 2022
Termination date rangeTermination date rangeMay 2023 - February 2024February 2022 - August 2024Termination date rangeOctober 2023 - June 2024May 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, 2022December 31, 2021
Interest rate caps: (1)
June 30, 2023December 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 rangeStrike rate low end of range2.00 %0.75 %Strike rate low end of range2.00 %2.00 %
Strike rate high end of rangeStrike rate high end of range4.00 %4.00 %Strike rate high end of range5.25 %4.50 %
Termination date rangeTermination date rangeOctober 2022 - August 2024February 2022 - August 2024Termination date rangeAugust 2023 - January 2025January 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 warrantwarrants 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 SeptemberJune 30, 2022,2023, no warrants have been exercised.
The initial fair value of the warrantwarrants 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 sheetsheets and changes in value are reported as a component of “realized and unrealized gain (loss) on derivativesderivatives” on the condensed consolidated statements of operations. This is a Level 2 valuation technique.
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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 placemarketplace 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.
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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 riserose 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 SeptemberJune 30, 2022,2023, the LIBORSOFR interest rate forward curve (Level 2 inputs) assumed an uptrenda 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)
TotalQuoted Market Prices (Level 1)Significant Other
Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
September 30, 2022
June 30, 2023June 30, 2023
AssetsAssetsAssets
Derivative assets:Derivative assets:Derivative assets:
Interest rate derivatives - capsInterest rate derivatives - caps$— $5,255 $— $5,255 Interest rate derivatives - caps$— $6,308 $— $6,308 
TotalTotal$— $5,255 $— $5,255 (1)Total$— $6,308 $— $6,308 (1)
LiabilitiesLiabilitiesLiabilities
Derivative liabilities:Derivative liabilities:Derivative liabilities:
WarrantsWarrants— (440)— (440)(2)Warrants$— $(165)$— $(165)(2)
NetNet$— $4,815 $— $4,815 Net$— $6,143 $— $6,143 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Quoted Market Prices (Level 1)Significant Other
Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
TotalQuoted Market Prices (Level 1)Significant Other
Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
December 31, 2021
December 31, 2022December 31, 2022
AssetsAssetsAssets
Derivative assets:Derivative assets:Derivative assets:
Interest rate derivatives - capsInterest rate derivatives - caps$— $139 $— $139 Interest rate derivatives - caps$— $6,482 $— $6,482 
$— $139 $— $139 (1)$— $6,482 $— $6,482 (1)
LiabilitiesLiabilitiesLiabilities
Derivative liabilities:Derivative liabilities:Derivative liabilities:
WarrantsWarrants— (1,435)— (1,435)(2)Warrants$— $(284)$— $(284)(2)
NetNet$— $(1,296)$— $(1,296)Net$— $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.
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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 IncomeGain (Loss) Recognized in Income
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
AssetsAssetsAssets
Derivative assets:Derivative assets:Derivative assets:
Interest rate derivatives - capsInterest 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)
TotalTotal$2,138 $(48)$3,024 $(126)Total$1,013 $43 $576 $886 
LiabilitiesLiabilitiesLiabilities
Derivative liabilities:Derivative liabilities:Derivative liabilities:
WarrantsWarrants$265 $190 $995 $190 Warrants$16 $1,165 $119 $730 
NetNet$2,403 $142 $4,019 $64 Net$1,029 $1,208 $695 $1,616 
Total combinedTotal combinedTotal combined
Interest rate derivatives - capsInterest rate derivatives - caps$2,138 $(48)$3,024 $(126)Interest rate derivatives - caps$(1,269)$43 $(3,573)$886 
WarrantsWarrants265 190 995 190 Warrants16 1,165 119 730 
Unrealized gain (loss) on derivativesUnrealized 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 capsRealized gain (loss) on interest rate caps2,282 (1) (2)— 4,149 (1) (2)— 
NetNet$2,403 $142 $4,019 $64 Net$1,029 $1,208 $695 $1,616 
________
(1)Excludes incomeReported in “realized and unrealized gain (loss) on derivatives” in our consolidated statements of $27,000 for both the threeoperations.
(2)Represents settled and nine months ended September 30, 2022, associated withunsettled 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, 2023December 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 cash63,439 63,439 54,155 54,155 
Accounts receivable, net32,864 32,864 51,448 51,448 
Due from related parties, net333 333 938 938 
Due from third-party hotel managers15,430 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 expenses135,096 135,096 133,978 133,978 
Dividends and distributions payable8,917 8,917 8,184 8,184 
Due to Ashford Inc.4,558 4,558 10,005 10,005 
Due to third-party hotel managers1,579 1,579 2,096 2,096 
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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, 2022December 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 cash53,932 53,932 47,376 47,376 
Accounts receivable, net27,158 27,158 23,701 23,701 
Due from related parties, net1,097 1,097 1,770 1,770 
Due from third-party hotel managers22,941 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 expenses122,150 122,150 96,316 96,316 
Dividends and distributions payable4,353 4,353 2,173 2,173 
Due to Ashford Inc.8,891 8,891 1,474 1,474 
Due to third-party hotel managers1,514 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 SeptemberJune 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.
19


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,
2022202120222021Three Months Ended June 30,Six Months Ended June 30,
(restated)(restated)2023202220232022
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 CompanyNet 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 $29,029 
Less: Dividends on preferred stock(6,028)(1,977)(13,395)(6,258)
Less: Deemed dividends on redeemable preferred stock(2,649)— (4,802)— 
Less: Dividends on common stock(710)— (2,124)— 
Less: Loss on extinguishment of preferred stock - Series B— (111)— (4,595)
Less: Dividends on unvested performance stock units(5)— (19)— 
Less: dividends on preferred stockLess: dividends on preferred stock(10,877)(4,064)(21,227)(7,367)
Less: deemed dividends on preferred stockLess: deemed dividends on preferred stock(301)— (2,755)— 
Less: dividends on common stockLess: dividends on common stock(3,291)(707)(6,580)(1,414)
Less: Dividends on unvested restricted shares(4)— (16)— 
Less: Net (income) loss allocated to performance stock units— — (43)— 
Less: Net (income) loss allocated to unvested restricted shares— — (49)— 
Less: dividends on unvested performance stock unitsLess: dividends on unvested performance stock units(36)(7)(72)(14)
Less: dividends on unvested restricted sharesLess: dividends on unvested restricted shares(8)(6)(17)(12)
Less: net (income) loss allocated to performance stock unitsLess: net (income) loss allocated to performance stock units— (95)— (207)
Less: net (income) loss allocated to unvested restricted sharesLess: net (income) loss allocated to unvested restricted shares— (74)— (161)
Undistributed net income (loss) allocated to common stockholdersUndistributed net income (loss) allocated to common stockholders$(17,436)$(9,034)$541 $(35,740)Undistributed net income (loss) allocated to common stockholders(16,359)9,413 (16,463)19,854 
Add back: Dividends on common stock710 — 2,124 — 
Distributed and undistributed net income (loss) - basic and diluted$(16,726)$(9,034)$2,665 $(35,740)
Add back: dividends on common stockAdd back: dividends on common stock3,291 707 6,580 1,414 
Distributed and undistributed net income (loss) - basicDistributed and undistributed net income (loss) - basic$(13,068)$10,120 $(9,883)$21,268 
Interest expense on Convertible Senior NotesInterest expense on Convertible Senior Notes— 1,108 — 2,211 
Dividends on preferred stock - Series E (inclusive of deemed dividends)Dividends on preferred stock - Series E (inclusive of deemed dividends)— 2,053 — 3,452 
Dividends on preferred stock - Series M (inclusive of deemed dividends)Dividends on preferred stock - Series M (inclusive of deemed dividends)— 128 — 149 
Distributed and undistributed net income (loss) - dilutedDistributed and undistributed net income (loss) - diluted$(13,068)$13,409 $(9,883)$27,080 
Weighted average common shares outstanding:Weighted average common shares outstanding:Weighted average common shares outstanding:
Weighted average common shares outstanding – basicWeighted average common shares outstanding – basic70,956 59,207 69,213 48,954 Weighted average common shares outstanding – basic65,806 70,740 68,378 68,325 
Effect of assumed exercise of warrantsEffect of assumed exercise of warrants— — — Effect of assumed exercise of warrants— — — 
Effect of assumed conversion of Convertible Senior NotesEffect of assumed conversion of Convertible Senior Notes— 13,610 — 13,610 
Effect of assumed conversion of preferred stock - Series EEffect of assumed conversion of preferred stock - Series E— 22,207 — 16,232 
Effect of assumed conversion of preferred stock - Series MEffect of assumed conversion of preferred stock - Series M— 1,112 — 630 
Weighted average common shares outstanding – dilutedWeighted average common shares outstanding – diluted70,956 59,207 69,214 48,954 Weighted average common shares outstanding – diluted65,806 107,669 68,378 98,798 
Income (loss) per share - basic:Income (loss) per share - basic:Income (loss) per share - basic:
Net income (loss) allocated to common stockholders per shareNet income (loss) allocated to common stockholders per share$(0.24)$(0.15)$0.04 $(0.73)Net income (loss) allocated to common stockholders per share$(0.20)$0.14 $(0.14)$0.31 
Income (loss) per share - diluted:Income (loss) per share - diluted:Income (loss) per share - diluted:
Net income (loss) allocated to common stockholders per shareNet income (loss) allocated to common stockholders per share$(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,
2022202120222021Three Months Ended June 30,Six Months Ended June 30,
(restated)(restated)2023202220232022
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 sharesIncome (loss) allocated to unvested restricted shares$$— $65 $— Income (loss) allocated to unvested restricted shares$$80 $17 $173 
Income (loss) allocated to unvested performance stock unitsIncome (loss) allocated to unvested performance stock units— 62 — Income (loss) allocated to unvested performance stock units36 102 72 221 
Income (loss) attributable to redeemable noncontrolling interests in operating partnershipIncome (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 BDividends on preferred stock - Series B1,059 1,058 3,175 3,689 Dividends on preferred stock - Series B1,058 1,058 2,116 2,116 
Loss on extinguishment of preferred stock - Series B— 111 — 4,595 
Interest expense on Convertible Senior NotesInterest expense on Convertible Senior Notes1,111 1,361 3,322 2,010 Interest expense on Convertible Senior Notes1,117 — 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 1,113 Dividends on preferred stock - Series M (inclusive of deemed dividends)1,133 — 2,324 — 
TotalTotal$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 sharesEffect of unvested restricted shares47 89 33 100 Effect of unvested restricted shares— 34 — 25 
Effect of unvested performance stock unitsEffect of unvested performance stock units340 — 346 
Effect of assumed conversion of operating partnership unitsEffect of assumed conversion of operating partnership units5,956 5,564 5,893 4,543 Effect of assumed conversion of operating partnership units5,172 5,868 5,576 5,862 
Effect of assumed conversion of preferred stock - Series BEffect of assumed conversion of preferred stock - Series B4,116 4,115 4,116 4,781 Effect of assumed conversion of preferred stock - Series B4,116 4,116 4,116 4,116 
Effect of assumed conversion of exchanged preferred stock - Series B— — — 485 
Effect of assumed conversion of Convertible Senior NotesEffect of assumed conversion of Convertible Senior Notes13,609 13,609 13,609 6,730 Effect of assumed conversion of Convertible Senior Notes13,609 — 13,609 — 
Effect of assumed conversion of preferred stock - Series EEffect of assumed conversion of preferred stock - Series E41,008 700 24,491 233 Effect of assumed conversion of preferred stock - Series E102,751 — 101,478 — 
Effect of assumed conversion of preferred stock - Series MEffect of assumed conversion of preferred stock - Series M4,563 32 1,941 11 Effect of assumed conversion of preferred stock - Series M12,219 — 11,945 — 
TotalTotal69,299 24,109 50,083 16,883 Total138,207 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 SeptemberJune 30, 2022,2023, there were approximately 2.12.4 million Performance LTIP units, representing 200% of the target, outstanding.
21

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.
With respect to the 2021, 2022 and 20222023 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-yearthree-year performance period. The performance criteria for the 2021, 2022 and 20222023 performance grants are based on performance 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 grantapplicable measurement date
19


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 million353,000 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 20222023 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 SeptemberJune 30, 2022,2023, we have issued a total of approximately 3.53.8 million LTIP and Performance LTIP units, net of Performance LTIP cancellations. All LTIP and Performance LTIP units, other than approximately 569,000614,000 LTIP units and 840,0001.2 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, 2022December 31, 2021
Redeemable noncontrolling interests in Braemar OP$40,635 $36,087 
Adjustments to redeemable noncontrolling interests (1)
$69 $275 
Ownership percentage of operating partnership7.66 %8.83 %
June 30, 2023December 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 partnership6.63 %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,
20222021202220212023202220232022
Net (income) loss attributable to redeemable noncontrolling interests in operating partnershipNet (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 unitsDistributions declared to holders of common units, LTIP units and Performance LTIP units84 — 251 — Distributions declared to holders of common units, LTIP units and Performance LTIP units$361 $84 $722 $167 
The following table presentsOn 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 valueCompany’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 $7.0 million.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Common units converted to common stock— — — 
Fair value of common units converted$— $— $— $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,
2022202120222021
Common stock dividends declared$719 $— $2,159 $— 
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
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 ninethree and six months endedSeptember 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 20222023 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 20222023 performance grants are based on performance conditions under the relevant literature, and the 2021, 2022 and 20222023 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 grantcorresponding 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,
2022202120222021
Series D Cumulative Preferred Stock$825 $825 $2,475 $2,475 
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Series D Cumulative Preferred Stock$825 $825 $1,650 $1,650 
Stock Repurchases—On December 5, 2017,7, 2022, our board of directors reapproved theapproved 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 duringDuring the ninesix months ended SeptemberJune 30, 2022 and 2021.2023, we repurchased 3.9 million shares of our common stock for approximately $18.9 million. As of SeptemberJune 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 whichhas 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 $10.0 million under the SEDA.
The issuance activity under the SEDA is summarized below (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Common shares sold to YA— — — 1,700 
Proceeds received$— $— $— $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 $4.2 million under the Lincoln Park Purchase Agreement.
The issuance activity under the Lincoln Park Purchase Agreement is summarized below (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Common shares sold to Lincoln Park— — — 766 
Additional commitment shares— — — 15 
Total common shares issued to Lincoln Park— — — 781 
Proceeds received$— $— $— $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.
24

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 $24.0 million.
The issuance activity under the Virtu July 2021 EDA is summarized below (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Common shares issued— 4,183 — 4,183 
Gross proceeds received$— $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.
25

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,
2022202120222021
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, 2021Nine Months Ended September 30, 2021
Preferred Shares TenderedCommon Shares IssuedPreferred Shares TenderedCommon Shares Issued
 Series B Convertible Preferred Stock30 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,
2023202220232022
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 offeringoffered 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”).
22


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.
26

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 declaredare 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,
20222021202220212023202220232022
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 proceedsNet 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.
23


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, 2022December 31, 2021June 30, 2023December 31, 2022
Series E Preferred StockSeries 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,
2022202120222021
Series E Preferred Stock$3,697 $90 $7,149 $90 
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
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, 2022Nine Months Ended September 30, 2022
Series E Preferred Stock shares redeemed
Redemption amount, net of redemption fees$84 $134 
27

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Series E Preferred Stock shares redeemed21 32 
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 offeringoffered 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.
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
24


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.
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.
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 declaredare 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.
28

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,
20222021202220212023202220232022
Series M Preferred Stock shares issued (1)
Series M Preferred Stock shares issued (1)
673 151,040 15
Series M Preferred Stock shares issued (1)
— 334531367
Net proceedsNet 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, 2022December 31, 2021June 30, 2023December 31, 2022
Series M Preferred StockSeries 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.
25


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,
2022202120222021
Series M Preferred Stock$447 $$596 $
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
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, 2022Nine Months Ended September 30, 2022Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Series M Preferred Stock shares redeemedSeries M Preferred Stock shares redeemedSeries M Preferred Stock shares redeemed— — 
Redemption amount, net of redemption feesRedemption 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.
29

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,
20222021202220212023202220232022
Advisory services feeAdvisory services feeAdvisory services fee
Base advisory feeBase 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 feeIncentive fee1,048 (1,637)1,294 — Incentive fee— (731)— 246 
TotalTotal$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.
26


BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Pursuant to the Company'sCompany’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 SeptemberJune 30, 2022 and December 31, 2021, due from related parties, net included2023, “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 connectionJune 2023, we entered into various 12-month agreements with the refinancingLismore 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 feethree 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 subsidiarystraight 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 toof Ashford Securities LLC, a subsidiary of Ashford Inc. (“Ashford Securities”). Beginning on the effective date of the Amended and Restated Contribution Agreement, costs will bewere 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 restateda true up (the “Amended and Restated True-Up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual expense reimbursement paidamount 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. AfterSecurities (the
27


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.
30

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIESOn 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 ofyear 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 expenseapproximately $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 SeptemberJune 30, 2022 there was2023, Braemar has a payablepre-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 Item2022202120222021
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 Item2023202220232022
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 Premiera 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 SeptemberJune 30, 2022,2023, Remington HotelsHospitality 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
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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 SeptemberJune 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.
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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 SubleaseSublicense 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 expiresexpired 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 ItemLine Item2022202120222021Line Item2023202220232022
Other hotel expensesOther 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 SeptemberJune 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 20232027 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 20172018 through 20212022 remain subject to potential examination by certain federal and state taxing authorities.
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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
LitigationOn 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 SeptemberJune 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 ADAAmericans 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
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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 SeptemberJune 30, 20222023 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.
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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
17. Restatement
SubsequentThe 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 issuanceCredit 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 $4.8 million redemption value adjustment, respectively, associated with the Company’s Series E Redeemable Preferred Stock and Series M Redeemable Preferred Stock, which would have decreased/increased net income/loss attributable to common stockholders and income/loss per share. Theseall amounts were reflected in the condensed consolidated statements of equity for the three and nine months ended September 30, 2022, in the line item titled “redemption value adjustment - preferred stock.” The restatement also impacted note 10, which was restated in these condensed consolidated financial statements. The restatement had no impact on the Company’s condensed consolidated balance sheet as of September 30, 2022, the condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2022 or the condensed consolidated statement of cash flows for the nine months ended September 30, 2022. Management evaluated the impact on other periods impacted by the error and determined it was immaterial.
The effect of correcting this misstatement resulted in a restatement of the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2022 as shown in the table below (amounts in thousands except per share amounts):
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
As Originally ReportedAdjustmentAs RestatedAs Originally ReportedAdjustmentAs Restated
Condensed Consolidated Statement of Operations
Deemed dividend on redeemable preferred stock$— $(2,649)$(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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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, 20222023 (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 inrising 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;
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changes in our business or investment strategy;
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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 HotelsHospitality 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 20212022 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 SeptemberJune 30, 2022,2023, we owned interests in 1516 hotel properties in sixseven states, the District of Columbia, Puerto Rico and St. Thomas, U.S. Virgin Islands with 3,9714,192 total rooms, or 3,7363,957 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 SeptemberJune 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.
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Mr. Monty J. Bennett is chairman and chief executive officer of Ashford Inc. and, together with Mr. Archie Bennett, Jr., as of SeptemberJune 30, 2022,2023, owned approximately 610,246610,261 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 exercisableconvertible (at an exercisea conversion price of $117.50 per share) into an additional approximate 3,991,1914,151,054 shares of Ashford Inc. common stock, which if exercisedconverted as of SeptemberJune 30, 2022 2023
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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 SeptemberJune 30, 2022,2023, Mr. Monty J. Bennett, chairman of our board of directors and his father, Mr. Archie Bennett, Jr., together owned approximately 4,557,3613,059,526 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 Officermortgage 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 Officerextension.
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 endedpurchased 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 OpenKeyentered 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 increasesAmerica, N.A., as administrative agent and L/C Issuer (as defined in the federal funds rateCredit Agreement). Bank of America, N.A. acted as administrative agent and interest rateslead arranger on short-term U.S. Treasury securities, the independent memberstransaction. 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 boarda 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 forUpon satisfaction of certain conditions, including the Advisor’s servicesaddition 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 equalFacility 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 average daily balanceoutstanding Facility amount.
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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 excess cash invested byNet Debt to EBITDA ratio, the Advisorapplicable 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.
The Credit Agreement includes customary events of default, and the actual rateoccurrence of return realized byan event of default will permit the Cash Management Strategy (the “Cash Management Fee”); provided thatLenders 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 pursuantLos Angeles, California to the Cash Management Strategy commenced in October 2022.
On October 31, 2022, the Company entered into a PurchaseCameo 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 closebe completed by December 31, 2022, subjectthe 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.
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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 SeptemberJune 30, 2022 2023Compared to Three Months Ended SeptemberJune 30, 20212022
The following table summarizes changes in key line items from our condensed consolidated statements of operations for the three months ended SeptemberJune 30, 20222023 and 20212022 (in thousands except percentages):
Three Months Ended September 30,Favorable (Unfavorable)Three Months Ended June 30,Favorable (Unfavorable)
20222021$ Change% Change20232022$ Change% Change
RevenueRevenueRevenue
RoomsRooms$104,503 $77,560 $26,943 34.7 %Rooms$117,137 $112,527 $4,610 4.1 %
Food and beverageFood and beverage37,624 24,494 13,130 53.6 Food and beverage47,776 42,269 5,507 13.0 
OtherOther19,062 14,123 4,939 35.0 Other21,794 20,098 1,696 8.4 
Total revenueTotal revenue161,189 116,177 45,012 38.7 Total revenue186,707 174,894 11,813 6.8 
ExpensesExpensesExpenses
Hotel operating expenses:Hotel operating expenses:Hotel operating expenses:
RoomsRooms25,424 17,072 (8,352)(48.9)Rooms26,705 24,134 (2,571)(10.7)
Food and beverageFood and beverage31,320 20,252 (11,068)(54.7)Food and beverage36,365 31,894 (4,471)(14.0)
Other expensesOther expenses50,836 36,124 (14,712)(40.7)Other expenses56,297 52,087 (4,210)(8.1)
Management feesManagement fees5,116 3,595 (1,521)(42.3)Management fees5,880 5,538 (342)(6.2)
Total hotel operating expensesTotal hotel operating expenses112,696 77,043 (35,653)(46.3)Total hotel operating expenses125,247 113,653 (11,594)(10.2)
Property taxes, insurance and otherProperty taxes, insurance and other8,851 12,622 3,771 29.9 Property taxes, insurance and other9,396 5,277 (4,119)(78.1)
Depreciation and amortizationDepreciation and amortization19,604 18,284 (1,320)(7.2)Depreciation and amortization22,567 19,571 (2,996)(15.3)
Advisory services feeAdvisory services fee8,854 4,809 (4,045)(84.1)Advisory services fee8,215 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 administrativeCorporate general and administrative8,075 2,094 (5,981)(285.6)Corporate general and administrative3,896 3,438 (458)(13.3)
Total expensesTotal expenses158,080 115,127 (42,953)(37.3)Total expenses169,321 148,130 (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 entityEquity in earnings (loss) of unconsolidated entity(74)(68)(6)(8.8)Equity in earnings (loss) of unconsolidated entity(75)(74)(1)(1.4)
Interest incomeInterest income745 13 732 5,630.8 Interest income2,295 162 2,133 1,316.7 
Other income (expense)27 — 27 
Interest expense and amortization of loan costsInterest 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 feesWrite-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 derivatives2,403 142 2,261 1,592.3 
Realized and unrealized gain (loss) on derivativesRealized and unrealized gain (loss) on derivatives1,029 1,208 (179)(14.8)
Income (loss) before income taxesIncome (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) benefitIncome tax (expense) benefit(95)(560)465 83.0 Income tax (expense) benefit75 (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 entities367 (1,468)1,835 125.0 
Net (income) loss attributable to redeemable noncontrolling interests in operating partnershipNet (income) loss attributable to redeemable noncontrolling interests in operating partnership1,166 823 343 41.7 Net (income) loss attributable to redeemable noncontrolling interests in operating partnership925 (846)1,771 209.3 
Net income (loss) attributable to the CompanyNet 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 SeptemberJune 30, 20222023 and 20212022 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 SeptemberJune 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 PropertyLocationTypeDate
Four Seasons Resort ScottsdaleScottsdale, ArizonaAcquisitionDecember 1, 2022
The following table illustrates the key performance indicators of all hotel properties owned for the periods indicated:
Three Months Ended June 30,
20232022
Occupancy70.91 %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,
20232022
Occupancy72.08 %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.
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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 PropertyFavorable (Unfavorable)
Rooms RevenueOccupancy
(change in bps)
ADR (change in %)
Comparable
Capital Hilton(1)
$1,713 620 8.7 %
Marriott Seattle Waterfront (2)
2,606 2,162 4.0 %
The Notary Hotel1,485 847 9.2 %
The Clancy(1,536)(396)(11.3)%
Sofitel Chicago Magnificent Mile196 28 2.2 %
Pier House Resort & Spa(1,111)(323)(12.0)%
The Ritz-Carlton St. Thomas(2,167)(748)(5.6)%
Park Hyatt Beaver Creek Resort & Spa(441)(1,096)5.3 %
Hotel Yountville(1,055)(277)(20.9)%
The Ritz-Carlton Sarasota(1)
(3,229)(2,244)0.8 %
Hilton La Jolla Torrey Pines(396)(317)(1.5)%
Bardessono Hotel and Spa(938)101 (17.6)%
The Ritz-Carlton Lake Tahoe729 778 2.6 %
Mr. C Beverly Hills Hotel(113)65 (4.1)%
The Ritz-Carlton Reserve Dorado Beach941 (169)10.7 %
Total$(3,316)93 (4.5)%
Non-comparable
Four Seasons Resort Scottsdale$7,924 n/an/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.
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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.
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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 $846,000 in the 2023 quarter and the 2022 quarter, respectively. Redeemable noncontrolling interests in Braemar OP represented ownership interests of 6.63% and 7.59% as of June 30, 2023 and 2022, respectively.
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Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
The following table summarizes changes in key line items from our condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 (in thousands except percentages):
Six Months Ended June 30,Favorable (Unfavorable)
20232022$ Change% Change
Revenue
Rooms$254,664 $217,719 $36,945 17.0 %
Food and beverage100,004 78,976 21,028 26.6 
Other47,340 40,079 7,261 18.1 
Total hotel revenue402,008 336,774 65,234 19.4 
Expenses
Hotel operating expenses:
Rooms54,063 44,318 (9,745)(22.0)
Food and beverage76,104 59,922 (16,182)(27.0)
Other expenses118,592 98,294 (20,298)(20.7)
Management fees12,585 9,686 (2,899)(29.9)
Total hotel operating expenses261,344 212,220 (49,124)(23.1)
Property taxes, insurance and other17,512 13,880 (3,632)(26.2)
Depreciation and amortization45,088 38,012 (7,076)(18.6)
Advisory services fee16,163 13,627 (2,536)(18.6)
(Gain) loss on legal settlements— (114)(114)(100.0)
Corporate general and administrative6,716 5,933 (783)(13.2)
Total expenses346,823 283,558 (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 income4,403 187 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 debt2,318 — 2,318 
Realized and unrealized gain (loss) on derivatives695 1,616 (921)(57.0)
Income (loss) before income taxes15,720 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 entities58 (1,442)1,500 104.0 
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership664 (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 PropertiesPropertyLocationTypeDate
Mr. C Beverly Hills HotelLos Angeles, CAAcquisitionAugust 5, 2021
The Ritz-Carlton Reserve Dorado BeachDorado, Puerto RicoAcquisitionMarch 11, 2022
Four Seasons Resort ScottsdaleScottsdale, ArizonaAcquisitionDecember 1, 2022
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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,
2022202120232022
OccupancyOccupancy71.50 %61.64 %Occupancy67.90 %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 includedowned for the full threesix months ended SeptemberJune 30, 20222023 and 2021:2022:
Three Months Ended September 30,Six Months Ended June 30,
2022202120232022
OccupancyOccupancy71.79 %61.81 %Occupancy69.02 %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 lossincome attributable to the Company increased $1.1decreased $14.8 million, from a net loss of $6.9$29.0 million for the threesix months ended September 30, 2021 (the “2021 quarter”) to $8.0 million for the three months ended SeptemberJune 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 quarter2023 period compared to the 2021 quarter.2022 period. During the 2022 quarter,2023 period, we experienced a 986472 basis point increase in occupancy and a 11.2%2.1% increase in room rates. The increase in rooms revenue is primarily duerates 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.
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Fluctuations in rooms revenue between the 2022 quarter2023 period and the 2021 quarter2022 period are a result of the changes in occupancy and ADR between the 2022 quarter2023 period and the 2021 quarter2022 period as reflected in the table below (dollars in thousands):
Hotel PropertyHotel PropertyFavorable (Unfavorable)Hotel PropertyFavorable (Unfavorable)
Rooms RevenueOccupancy
(change in bps)
ADR (change in %)Rooms RevenueOccupancy
(change in bps)
ADR
(change in %)
ComparableComparableComparable
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 HotelThe Notary Hotel2,113 1,361 18.7 %The Notary Hotel2,929 1,014 9.7 %
The ClancyThe Clancy4,476 751 69.3 %
The Clancy
1,979 332 8.2 %
Sofitel Chicago Magnificent MileSofitel Chicago Magnificent Mile2,932 1,470 26.1 %Sofitel Chicago Magnificent Mile1,003 550 0.4 %
Pier House Resort & SpaPier House Resort & Spa(476)(237)(5.3)%Pier House Resort & Spa(2,464)(422)(10.4)%
The Ritz-Carlton St. ThomasThe Ritz-Carlton St. Thomas(1,715)(594)(6.7)%The Ritz-Carlton St. Thomas(5,050)(733)(6.3)%
Park Hyatt Beaver Creek Resort & SpaPark Hyatt Beaver Creek Resort & Spa90 (547)10.4 %Park Hyatt Beaver Creek Resort & Spa1,724 (365)17.5 %
Hotel YountvilleHotel 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 PinesHilton La Jolla Torrey Pines2,761 1,384 21.8 %Hilton La Jolla Torrey Pines1,008 272 4.1 %
Bardessono Hotel and SpaBardessono Hotel and Spa(1,012)(1,386)2.0 %Bardessono Hotel and Spa(1,771)(354)(14.6)%
The Ritz-Carlton Lake TahoeThe Ritz-Carlton Lake Tahoe1,021 851 1.8 %The Ritz-Carlton Lake Tahoe407 491 (6.3)%
Mr. C Beverly Hills HotelMr. C Beverly Hills Hotel(202)496 (9.2)%
TotalTotal$16,815 998 4.9 %Total$3,967 797 (7.0)%
Non-comparableNon-comparableNon-comparable
Mr. C Beverly Hills Hotel$1,938 2,128 0.8 %
The Ritz-Carlton Reserve Dorado BeachThe Ritz-Carlton Reserve Dorado Beach8,190 n/an/aThe Ritz-Carlton Reserve Dorado Beach$10,896 n/an/a
Four Seasons Resort ScottsdaleFour Seasons Resort Scottsdale22,081 n/an/a
TotalTotal$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 quarter2023 period compared to the 2021 quarter. This increase is attributable to2022 period. We experienced an aggregate increase in food and beverage revenue of $8.1 million at tensix comparable hotel properties of $9.3 million as they are recovering from the COVID-19 pandemic, as well as an increaseincreases 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 ofat 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 $398,000approximately $2.9 million at The Ritz-Carlton St. Thomas, Hotel Yountville andThe 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 quarter2023 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 revenuerooms expense of $2.5$5.1 million at 11nine comparable hotel properties, and increasesan 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 $8.4approximately $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, andThe 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 quarter2023 period compared to the 2021 quarter.2022 period. This increase is attributable to an aggregate increasehigher food and beverage expense of $6.9$5.4 million at teneight 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 $158,000approximately $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.
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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 quarter2023 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.
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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 as2023 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 quarter2023 period and 4.4%4.2% in the 2021 quarter.2022 period. The increase in direct expenses is primarily attributable toassociated with higher occupancy levelsdirect expenses of approximately $732,000 at all of ournine 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 comprisesis 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 comprisingcomprised 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 quarter2023 period compared to the 2021 quarter. Base management2022 period. Management fees increased $1.1$1.9 million at nineseven 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, YountvilleThe 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 $3.8increased $3.6 million, or 29.9%26.2%, to $8.9$17.5 million in the 2022 quarter2023 period compared to the 2021 quarter. The decrease2022 period. This increase is mainly composed ofprimarily attributable to an aggregate decreaseincrease of approximately $5.3$2.6 million at fourtwelve 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 resultand $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 quarter2023 period compared to the 2021 quarter. The2022 period. This increase is comprised $240,000 at the Mr. C Beverly Hills Hotel and $1.6of $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 propertiesthe 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 quarter2023 period compared to the 2021 quarter2022 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 $3.3and $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 costs2022 period, the Company received an additional payment of $275,000approximately $114,000 related to accrued interest on the initial settlement amount associated with the acquisitionCity 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 expenseexpenses is primarily due to higher professional fees of $632,000,
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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 decreaselower professional fees of $60,000 in$221,000 and lower public company costs. During the third quartercosts 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.
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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 relatedattributable to bank account interest resulting from higher cash balances and highershort-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 quarter2023 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 Notesrates and the mortgage loans associated withloan 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 quarterperiod were 4.85% and 0.62%, respectively. The average SOFR rates for the 2023 period and the 2021 quarter2022 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, primarily2023 period related to the mortgagevarious loan extensionmodifications. 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 withresulting from third party cost from the $419,000 write-offrefinance of loan coststhe 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-downassumption of the mortgage loan assumed withwhen 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 quarterperiod consisted of an unrealized gain of approximately $265,000 on warrants and approximately $2.1 million$886,000 on interest rate caps.
Unrealized gaincaps, 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 thea decrease in the profitabilitytaxable income of certain of our TRS entities in the 2022 quarter2023 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 quarter2023 period and the 2021 quarter,2022 period, respectively. At both SeptemberJune 30, 20222023 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$664,000 in the 2022 quarter2023 period and the 2021 quarter, respectively. Redeemable noncontrolling interests in Braemar OP represented ownership interests of 7.66% and 8.35% as of September 30, 2022 and 2021, respectively.
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Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
The following table summarizes changes in key line items from our condensed consolidated statements of operations for the nine months ended September 30, 2022 and 2021 (in thousands except percentages):
Nine Months Ended September 30,Favorable (Unfavorable)
20222021$ Change% Change
Revenue
Rooms$322,222 $195,720 $126,502 64.6 %
Food and beverage116,600 60,976 55,624 91.2 
Other59,141 40,439 18,702 46.2 
Total hotel revenue497,963 297,135 200,828 67.6 
Expenses
Hotel operating expenses:
Rooms69,742 41,569 (28,173)(67.8)
Food and beverage91,242 50,526 (40,716)(80.6)
Other expenses149,130 98,143 (50,987)(52.0)
Management fees14,802 9,079 (5,723)(63.0)
Total hotel operating expenses324,916 199,317 (125,599)(63.0)
Property taxes, insurance and other22,731 27,076 4,345 16.0 
Depreciation and amortization57,616 54,881 (2,735)(5.0)
Advisory services fee22,481 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 administrative14,008 6,077 (7,931)(130.5)
Total expenses441,638 303,276 (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 income932 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 derivatives4,019 64 3,955 6,179.7 
Income (loss) before income taxes27,684 (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 PropertiesLocationTypeDate
Mr. C Beverly Hills HotelLos Angeles, CaliforniaAcquisitionAugust 5, 2021
The Ritz-Carlton Reserve Dorado BeachDorado, Puerto RicoAcquisitionMarch 11, 2022
The following table illustrates the key performance indicators of all hotel properties for the periods indicated:
Nine Months Ended September 30,
20222021
Occupancy66.00 %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,
20222021
Occupancy65.79 %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 PropertyFavorable (Unfavorable)
Rooms RevenueOccupancy
(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 Hotel7,689 2,065 23.7 %
The Clancy
14,997 2,166 84.0 %
Sofitel Chicago Magnificent Mile8,859 2,301 24.2 %
Pier House Resort & Spa3,625 (543)28.4 %
The Ritz-Carlton St. Thomas4,249 (252)13.9 %
Park Hyatt Beaver Creek Resort & Spa6,639 686 38.3 %
Hotel Yountville1,798 (386)28.5 %
The Ritz-Carlton Sarasota6,605 63 17.1 %
Hilton La Jolla Torrey Pines9,749 2,374 26.9 %
Bardessono Hotel and Spa1,629 (185)15.7 %
The Ritz-Carlton Lake Tahoe5,362 142 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/an/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 SeptemberJune 30, 20222023 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.
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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 ourone mortgage loans,loan, as discussed above.below. Our loansloan 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 SeptemberJune 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 thea 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
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having an aggregate value of up to $50$25 million. The board of directors’ authorization replaced any previous repurchase authorizations. No shares were repurchased duringDuring the ninesix months ended SeptemberJune 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 timerepurchased 3.9 million shares of our common stock having an aggregate offering price of up to $50.0for 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 7.4completed 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 hasannounced the closing of its offering of the Series E Preferred Stock and Series M Preferred Stock. The Company issued approximately 10.316.4 million shares of Series E Preferred Stock and received net proceeds of approximately $231.8$369.5 million and issued approximately 1.22.0 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.
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
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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 NovemberAugust 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
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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 NovemberAugust 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 secondan 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 NovemberAugust 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 refinancedrepaid 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 finalthree 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-recourse18, 2023, the Company amended the mortgage loan totals $70.5secured 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 hasMarriott 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-yearstrike 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 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 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 termBorrowing 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 threeThe 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.
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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 loanCredit 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 Beachguaranteed by the Company, assumedthe 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 6Borrowing 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 condensedEBITDA 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 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
(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.
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 SeptemberJune 30, 20222023 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 ninesix months ended SeptemberJune 30, 20222023 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 ninesix months ended SeptemberJune 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.
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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 ninesix months ended SeptemberJune 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 $2.1and $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 MarchOn December 8, 2022, theour board of directors approved an update to our previously announcedthe Company’s dividend policy for 2022 to revise our then-expectation2023. 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 thirdsecond 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 20212022 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 excludedexclude 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.
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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,
20222021202220212023202220232022
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 costsInterest expense and amortization of loan costs14,490 8,364 33,293 22,346 Interest expense and amortization of loan costs23,600 10,281 46,473 18,803 
Depreciation and amortizationDepreciation and amortization19,604 18,284 57,616 54,881 Depreciation and amortization22,567 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 entityEquity in (earnings) loss of unconsolidated entity74 68 220 198 Equity in (earnings) loss of unconsolidated entity75 74 148 146 
Company’s portion of EBITDA of OpenKeyCompany’s portion of EBITDA of OpenKey(74)(68)(220)(196)Company’s portion of EBITDA of OpenKey(80)(75)(157)(146)
EBITDA25,806 18,989 118,593 47,378 
EBITDA and EBITDAreEBITDA and EBITDAre42,949 47,608 107,272 92,787 
(Gain) loss on insurance settlement and disposition of assets— — — (696)
EBITDAre25,806 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 costsTransaction and conversion costs5,562 980 6,888 2,148 Transaction and conversion costs1,056 771 2,251 1,326 
Other (income) expense(27)— (27)— 
Write-off of loan costs and exit fees432 106 1,960 
Unrealized (gain) loss on derivatives(2,403)(142)(4,019)(64)
Write-off of premiums, loan costs and exit feesWrite-off of premiums, loan costs and exit fees248 22 260 98 
Realized and unrealized (gain) loss on derivativesRealized and unrealized (gain) loss on derivatives(1,029)(1,208)(695)(1,616)
Stock/unit-based compensationStock/unit-based compensation3,391 3,044 8,941 7,265 Stock/unit-based compensation2,899 3,185 5,227 5,550 
Legal, advisory and settlement costsLegal, advisory and settlement costs544 107 1,176 (320)Legal, advisory and settlement costs12 315 81 632 
Advisory services incentive feeAdvisory services incentive fee1,048 (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 OpenKeyCompany’s portion of adjustments to EBITDAre of OpenKeyCompany’s portion of adjustments to EBITDAre of OpenKey— (1)— 
Adjusted EBITDAreAdjusted EBITDAre$34,049 $21,892 $133,303 $58,072 Adjusted EBITDAre$46,253 $50,079 $112,315 $99,254 
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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.
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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,
2022202120222021Three Months Ended June 30,Six Months Ended June 30,
(restated)(restated)2023202220232022
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 entities367 (1,468)58 (1,442)
Net (Income) loss attributable to redeemable noncontrolling interests in operating partnershipNet (Income) loss attributable to redeemable noncontrolling interests in operating partnership1,166 823 (647)3,184 Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership925 (846)664 (1,813)
Preferred dividendsPreferred 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 stockDeemed dividends on preferred stock(301)— (2,755)— 
Net income (loss) attributable to common stockholdersNet 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 partnershipNet 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 entityEquity in (earnings) loss of unconsolidated entity74 68 220 198 Equity in (earnings) loss of unconsolidated entity75 74 148 146 
(Gain) loss on insurance settlement and disposition of assets— — — (696)
Company’s portion of FFO of OpenKeyCompany’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 unitholdersFFO available to common stockholders and OP unitholders1,073 7,762 59,117 13,224 FFO available to common stockholders and OP unitholders7,804 30,075 33,075 60,197 
Deemed dividends on redeemable preferred stock2,649 4,802 
(Gain) loss on extinguishment of preferred stock— 111 — 4,595 
Deemed dividends on preferred stockDeemed dividends on preferred stock301 — 2,755 — 
Transaction and conversion costsTransaction and conversion costs5,562 980 6,888 2,148 Transaction and conversion costs1,056 771 2,251 1,326 
Interest expense accretion on refundable membership club benefits177 190 545 582 
Write-off of loan costs and exit fees432 106 1,960 
Amortization of loan costs (1)
598 407 1,793 1,684 
Write-off of premiums, loan costs and exit feesWrite-off of premiums, loan costs and exit fees248 22 260 98 
Unrealized (gain) loss on derivativesUnrealized (gain) loss on derivatives(2,403)(142)(4,019)(64)Unrealized (gain) loss on derivatives1,253 (1,208)3,454 (1,616)
Stock/unit-based compensationStock/unit-based compensation3,391 3,044 8,941 7,265 Stock/unit-based compensation2,899 3,185 5,227 5,550 
Legal, advisory and settlement costsLegal, advisory and settlement costs544 107 1,176 (320)Legal, advisory and settlement costs12 315 81 632 
Interest expense accretion on refundable membership club depositsInterest expense accretion on refundable membership club deposits164 178 342 368 
Amortization of loan costsAmortization of loan costs661 553 1,400 1,195 
Advisory services incentive feeAdvisory services incentive fee1,048 (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 OpenKeyCompany’s portion of adjustments to FFO of OpenKeyCompany’s portion of adjustments to FFO of OpenKey— (1)— 
Adjusted FFO available to common stockholders and OP unitholdersAdjusted FFO available to common stockholders and OP unitholders12,648 11,255 80,649 31,081 Adjusted FFO available to common stockholders and OP unitholders$14,398 $33,159 $46,527 $68,001 
____________________
(1)Net of adjustment for noncontrolling interest in consolidated entities. The following table presents the amounts of the adjustments for noncontrolling interests for each line item:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
Depreciation and amortization on real estateDepreciation and amortization on real estate$(648)$(665)$(1,938)$(2,038)Depreciation and amortization on real estate$(804)$(644)$(1,540)$(1,290)
Amortization of loan costsAmortization of loan costs(23)(22)(68)(65)Amortization of loan costs(24)(23)(47)(45)
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Hotel Properties
The following table presents certain information related to our hotel properties:
Hotel PropertyHotel PropertyLocationTotal Rooms% OwnedOwned RoomsHotel PropertyLocationTotal Rooms% OwnedOwned Rooms
Fee Simple PropertiesFee Simple PropertiesFee Simple Properties
Capital HiltonCapital HiltonWashington, D.C.550 75 %413 Capital HiltonWashington, D.C.550 75 %413 
Marriott Seattle WaterfrontMarriott Seattle WaterfrontSeattle, WA361 100 %361 Marriott Seattle WaterfrontSeattle, WA369 100 %369 
The Notary HotelThe Notary HotelPhiladelphia, PA499 100 %499 The Notary HotelPhiladelphia, PA499 100 %499 
The ClancyThe ClancySan Francisco, CA410 100 %410 The ClancySan Francisco, CA410 100 %410 
Sofitel Chicago Magnificent MileSofitel Chicago Magnificent MileChicago, IL415 100 %415 Sofitel Chicago Magnificent MileChicago, IL415 100 %415 
Pier House Resort & SpaPier House Resort & SpaKey West, FL142 100 %142 Pier House Resort & SpaKey West, FL142 100 %142 
The Ritz-Carlton St. ThomasThe Ritz-Carlton St. ThomasSt. Thomas, USVI180 100 %180 The Ritz-Carlton St. ThomasSt. Thomas, USVI180 100 %180 
Park Hyatt Beaver Creek Resort & SpaPark Hyatt Beaver Creek Resort & SpaBeaver Creek, CO190 100 %190 Park Hyatt Beaver Creek Resort & SpaBeaver Creek, CO193 100 %193 
Hotel YountvilleHotel YountvilleYountville, CA80 100 %80 Hotel YountvilleYountville, CA80 100 %80 
The Ritz-Carlton SarasotaThe Ritz-Carlton SarasotaSarasota, FL276 100 %276 The Ritz-Carlton SarasotaSarasota, FL276 100 %276 
The Ritz-Carlton Lake Tahoe (1)
The Ritz-Carlton Lake Tahoe (1)
Truckee, CA170 100 %170 
The Ritz-Carlton Lake Tahoe (1)
Truckee, CA170 100 %170 
Mr. C Beverly Hills Hotel (2)
Mr. C Beverly Hills Hotel (2)
Los Angeles, CA143 100 %143 
Mr. C Beverly Hills Hotel (2)
Los Angeles, CA143 100 %143 
The Ritz-Carlton Reserve Dorado Beach (3)
The Ritz-Carlton Reserve Dorado Beach (3)
Dorado, Puerto Rico96 100 %96
The Ritz-Carlton Reserve Dorado Beach (3)
Dorado, Puerto Rico96 100 %96
Four Seasons Resort ScottsdaleFour Seasons Resort ScottsdaleScottsdale, AZ210 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, CA394 75 %296 
Hilton La Jolla Torrey Pines (5)
La Jolla, CA394 75 %296 
Bardessono Hotel and Spa (6)
Bardessono Hotel and Spa (6)
Yountville, CA65 100 %65 
Bardessono Hotel and Spa (6)
Yountville, CA65 100 %65 
TotalTotal3,971 3,736 Total4,192 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.
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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 SeptemberJune 30, 2022.2023. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of SeptemberJune 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
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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.
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 Americans with Disability Act and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within
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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. TheIn 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 conditionsOur 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 Statesfuture 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 impacteffect on our earningsbusiness 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 outlookBoard’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 uncertainsecond quarter of 2023:
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of a Publicly Announced PlanMaximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
Common stock:
April 1 to April 30485 (1)$3.77 — $
May 1 to May 31— $— — $
June 1 to June 3088 (1)$3.92 — $
Total573 $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 disruptions88 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 pacevesting 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 misstatementrestricted 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 ascommon 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 misstatementour 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.
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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
ExhibitDescription
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.7*
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ExhibitDescription
10.1
10.2
10.3
31.1*
31.2*
32.1**
32.2**
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 20222023 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.INSXBRL 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.SCHInline XBRL Taxonomy Extension Schema DocumentSubmitted electronically with this report.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentSubmitted electronically with this report.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentSubmitted electronically with this report.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.Submitted electronically with this report.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.Submitted electronically with this report.
104Cover 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, 2023By:
/s/ RICHARD J. STOCKTON
Richard J. Stockton
President and Chief Executive Officer
Date:February 2,August 7, 2023By:
/s/ DERIC S. EUBANKS
Deric S. Eubanks
Chief Financial Officer
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