What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 376 added, 236 removed, 724 unchanged (46% of the section changed)

4 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Investments in hotel properties, gross $ 1,774,306 $ 1,784,849

8 unchanged sentences

Investment in unconsolidated entity 1,578 1,708

Derivative assets 1 —

Operating lease right-of-use assets 80,710 81,260

14 unchanged sentences

Commitments and contingencies (note 15)

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 4,545,016 and 5,031,473 shares issued and outstanding at March 31, 2021 and December 31, 2020

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,108,017 and 5,031,473 shares issued and outstanding at June 30, 2021 and December 31, 2020

66,064 106,949

1 unchanged sentence

Preferred stock, $ 0.01 value, 80,000,000 shares authorized:

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at March 31, 2021 and December 31, 2020

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 43,465,880 and 38,274,770 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 57,311,232 and 38,274,770 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 661,576 541,870

9 unchanged sentences

(unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Rooms $ 63,837 $ 6,533 $ 118,160 $ 77,001

11 unchanged sentences

Advisory services fee 6,739 4,901 11,534 9,970

(Gain) loss on legal settlements ( 989 ) — ( 989 ) —

Transaction costs 296 — 296 —

Corporate general and administrative 2,383 1,513 3,983 3,445

5 unchanged sentences

Other income (expense) — ( 64 ) — ( 202 )

Interest expense and amortization of loan costs ( 6,756 ) ( 11,897 )

Interest expense and amortization of discounts and loan costs ( 7,226 ) ( 17,411 ) ( 13,982 ) ( 29,308 )

Write-off of loan costs and exit fees ( 1,177 ) ( 2,237 ) ( 1,528 ) ( 2,237 )

20 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

NET INCOME (LOSS) $ ( 11,364 ) $ ( 56,105 ) $ ( 22,398 ) $ ( 71,492 )

16 unchanged sentences

Shares Amount Shares Amount Shares Amount

Balance at March 31, 2021 1,600 $ 16 43,466 $ 434 $ 571,288 $ ( 278,445 ) $ ( 16,335 ) $ 276,958 4,545 $ 96,609 $ 28,162

Equity-based compensation — — — — 1,929 — — 1,929 — — 876

Issuance of common stock 7,959 80 47,188 — 47,268 — — —

Issuance of restricted shares/units — — 260 3 ( 3 ) — — — — — —

Forfeiture of restricted common shares — — ( 12 ) — — — — — — — —

Dividends declared – preferred stock - Series B ($ 0.34 /share)

— — — — — ( 1,068 ) — ( 1,068 ) — — —

Dividends declared – preferred stock - Series D ($ 0.52 /share)

— — — — — ( 825 ) — ( 825 ) — — —

Contributions from noncontrolling interests — — — — — — 920 920 — — —

Redemption/conversion of operating partnership units — — 2 — 17 — — 17 — — ( 17 )

Net income (loss) — — — — — ( 9,233 ) ( 849 ) ( 10,082 ) — — ( 1,282 )

Extinguishment of preferred stock — — 5,636 56 34,900 ( 4,411 ) — 30,545 ( 1,437 ) ( 30,545 ) —

Equity component of Convertible Senior Notes — — 6,257 — — 6,257 — — —

Redemption value adjustment — — — — — ( 1,659 ) — ( 1,659 ) — — 1,659

Balance at June 30, 2021 1,600 $ 16 57,311 $ 573 $ 661,576 $ ( 295,641 ) $ ( 16,264 ) $ 350,260 3,108 $ 66,064 $ 29,398

8.25 % Series D Cumulative Preferred Stock

Common Stock Additional

Capital Accumulated Deficit Noncontrolling Interest in Consolidated Entities Total 5.50 % Series B Cumulative Convertible

Preferred Stock

Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount

Balance at December 31, 2020 1,600 $ 16 38,275 $ 382 $ 541,870 $ ( 266,010 ) $ ( 15,088 ) $ 261,170 5,031 $ 106,949 $ 27,655

2 unchanged sentences

Issuance of common stock — — 11,164 112 65,465 — 65,577 — — —

Issuance of preferred stock — — — — — — — — — — —

Issuance of restricted shares/units — — 764 8 ( 8 ) — — — — — —

4 unchanged sentences

— — — — — ( 1,650 ) — ( 1,650 ) — — —

Contributions from noncontrolling interests — — — — — — 920 920 — — —

Redemption/conversion of operating partnership units — — 2 — 17 — — 17 — — ( 17 )

Net income (loss) — — — — — ( 17,941 ) ( 2,096 ) ( 20,037 ) — — ( 2,361 )

Extinguishment of preferred stock — — 7,171 71 45,298 ( 4,484 ) — 40,885 ( 1,923 ) ( 40,885 ) —

Equity component of Convertible Senior Notes — — — — 6,257 — — 6,257 — — —

Redemption value adjustment — — — — — ( 2,925 ) — ( 2,925 ) — — 2,925

Balance at June 30, 2021 1,600 $ 16 57,311 $ 573 $ 661,576 $ ( 295,641 ) $ ( 16,264 ) $ 350,260 3,108 $ 66,064 $ 29,398

8.25 % Series D Cumulative Preferred Stock

Common Stock Additional

Capital Accumulated Deficit Noncontrolling Interest in Consolidated Entities Total 5.50 % Series B Cumulative Convertible

Preferred Stock

Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount

Balance at March 31, 2020 1,600 $ 16 33,511 $ 335 $ 524,341 $ ( 166,108 ) $ ( 9,224 ) $ 349,360 5,031 $ 107,352 $ 36,786

Purchase of common stock — — ( 15 ) — ( 42 ) — — ( 42 ) — — —

Equity-based compensation — — — — 1,499 — — 1,499 — — 549

Issuance of restricted shares/units — — 35 — 48 — — 48 — — 44

Forfeiture of restricted common shares — — ( 3 ) — — — — — — — —

Dividends declared – preferred stock - Series B ($ 0.34 /share)

— — — — — ( 1,730 ) — ( 1,730 ) — — —

Dividends declared – preferred stock-Series D ($ 0.52 /share)

— — — — — ( 825 ) — ( 825 ) — — —

Net income (loss) — — — — — ( 47,931 ) ( 2,404 ) ( 50,335 ) — — ( 5,770 )

Redemption value adjustment — — — — — 20 — 20 — — ( 20 )

Balance at June 30, 2020 1,600 $ 16 33,528 $ 335 $ 525,846 $ ( 216,574 ) $ ( 11,628 ) $ 297,995 5,031 $ 107,352 $ 31,589

8.25 % Series D Cumulative Preferred Stock

17 unchanged sentences

Redemption value adjustment — — — — — 26 — 26 — — ( 26 )

Balance at March 31, 2020 1,600 $ 16 33,511 $ 335 $ 524,341 $ ( 166,108 ) $ ( 9,224 ) $ 349,360 5,031 $ 107,352 $ 36,786

Balance at June 30, 2020 1,600 $ 16 33,528 $ 335 $ 525,846 $ ( 216,574 ) $ ( 11,628 ) $ 297,995 5,031 $ 107,352 $ 31,589

See Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Bad debt expense 217 439

Amortization of loan costs and capitalized default interest ( 583 ) 1,071

Amortization of loan costs, discounts and capitalized default interest ( 855 ) 1,706

Write-off of loan costs and exit fees 1,528 2,237

22 unchanged sentences

Net proceeds from disposition of assets 1,816 —

Deposit for acquisition of hotel property ( 3,000 ) —

Investment in unconsolidated entity — ( 26 )

10 unchanged sentences

Proceeds from issuance of common stock 65,679 —

Contributions from noncontrolling interest in consolidated entities 920 —

Distributions to noncontrolling interest in consolidated entities — ( 2,639 )

6 unchanged sentences

Income taxes paid (refunded) ( 41 ) 775

Three Months Ended March 31,

Six Months Ended June 30,

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

2 unchanged sentences

Capital expenditures accrued but not paid 3,109 9,685

Accrued but unpaid financing costs — 1,364

Non-cash loan principal associated with default interest and late charges — 4,926

Accrued common stock offering expense 34 —

Unsettled common stock offering proceeds 297 —

Accrued preferred stock offering expenses — 17

16 unchanged sentences

Braemar conducts its business and owns substantially all of its assets through its operating partnership, Braemar Hospitality Limited Partnership (“Braemar OP”).

In this report, the terms the “Company,” “we,” “us” or “our” refers to Braemar Hotels & Resorts Inc.

In this report, the terms “Company,” “we,” “us” or “our” refers to Braemar Hotels & Resorts Inc.

and, as the context may require, all entities included in its condensed consolidated financial statements.

10 unchanged sentences

has an ownership interest.

These products and services include, but are not limited to project management services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory 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 March 31, 2021, own thirteen hotel properties in six states, the District of Columbia and the U.S.

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 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 June 30, 2021, own thirteen hotel properties in six states, the District of Columbia and the U.S.

Virgin Islands (“USVI”).

1 unchanged sentence

These hotel properties represent 3,722 total rooms, or 3,487 net rooms, excluding those attributable to our partner.

As a REIT, Braemar is required to comply with limitations imposed by the Internal Revenue Code related to operating hotels.

As of March 31, 2021, twelve of our thirteen 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”).

As a REIT, Braemar is required to comply with limitations imposed by the Code related to operating hotels.

As of June 30, 2021, twelve of our thirteen 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.

1 unchanged sentence

Hotel operating results related to the hotel properties are included in the condensed consolidated statements of operations.

As of March 31, 2021, ten of the thirteen 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.

As of June 30, 2021, ten of the thirteen 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.

3 unchanged sentences

(“Accor”), Hyatt Corporation (“Hyatt”), Ritz-Carlton (Virgin Islands), Inc.

and The Ritz-Carlton Hotel Company, L.L.C., each of which are affiliates of Marriott (“Ritz-Carlton”) and Remington Hotels, which are eligible independent contractors under the Internal Revenue Code.

and The Ritz-Carlton Hotel Company, L.L.C., each of which are affiliates of Marriott (“Ritz-Carlton”) and Remington Hotels, which are eligible independent contractors under the Code.

COVID-19, Management’s Plans and Liquidity

In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has resulted in significant travel restrictions and extended shutdown of numerous businesses in every state in the United States.

In March 2020, the World Health Organization declared COVID-19 to be a global pandemic.

1 unchanged sentence

The prolonged presence of the virus has resulted in health and other government authorities imposing widespread restrictions on travel and other businesses.

The hotel industry and our portfolio have experienced the postponement or cancellation of a significant number of business conferences and similar events.

Following the government mandates and health official orders in March 2020, the Company temporarily

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

suspended operations at 11 of its 13 hotels and dramatically reduced staffing and expenses at its hotels that remained operational.

COVID-19 has had a significant negative impact on the Company’s operations and financial results to date.

The full financial impact of the reduction in hotel demand caused by the pandemic and suspension of operations at the Company’s hotels cannot be reasonably estimated at this time due to uncertainty as to its severity and duration.

In addition, one or more possible recurrences of COVID-19 cases could result in further reductions in business and personal travel and could cause state and local governments to reinstate travel restrictions.

The Company expects that the COVID-19 pandemic will continue to have a negative impact on the Company’s results of operations, financial position and cash flow in 2021 and potentially much longer.

As a result, in March 2020, the Company fully drew down its $ 75 million secured revolving credit facility, which was later converted into a term loan, suspended the quarterly cash dividend on its common stock, reduced planned capital expenditures, and, working closely with its hotel managers, significantly reduced its hotels’ operating expenses.

See note 6 for term loan details.

All of the Company’s property-level debt is non-recourse.

Beginning on April 1, 2020, we did not make at least one interest payment under nearly all of our loan agreements, which constituted an “Event of Default” as such term is defined under the applicable loan documents.

Further, the Company triggered an “Event of Default,” as defined under the secured revolving credit facility agreement as a result of the Company being in default on mortgage and mezzanine loans with an aggregate principal amount in excess of $ 200 million.

Pursuant to the terms of the applicable loan documents, such an Event of Default caused an automatic increase in the interest rate on our outstanding loan balance for the period such Event of Default remains outstanding.

Following an Event of Default, our lenders can generally elect to accelerate all principal and accrued interest payments that remain outstanding under the applicable loan agreement and foreclose on the applicable hotel properties that are security for such loans.

Such Event of Default under the secured revolving credit facility agreement was eliminated by the First Amendment to the Second Amended and Restated Credit Agreement, dated June 8, 2020, which provides that defaults under mortgage and mezzanine loans wi th an aggregate principal amount in excess of $ 200 million do not trigger a default under the secured revolving credit agreement unless such mortgage or mezzanine loans are also accelerated, and excluding from the $ 200 million threshold, any default and acceleration under those certain mortgage and mezzanine loans having an aggregate principal amount of $ 435 million and secured by the Marriott Seattle Waterfront, Sofitel Chicago Magnificent Mile, The Notary Hotel and The Clancy.

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.

The Company also amended its secured revolving credit facility converting it into a $ 65 million secured term loan and changed the terms of certain financial covenants, including a waiver of the Consolidated Fixed Charge Coverage Ratio (as defined in the Amendment) through March 31, 2021, that the Company was subject to under the secured revolving credit facility.

On February 22, 2021, the Company entered into the Second Amendment to Second Amended and Restated Credit Agreement.

The amendment provides an extension of the waiver on the majority of the covenants through the fourth quarter of 2021 and a reduced fixed charge coverage ratio covenant through the end of 2022.

The first period in which covenants will be tested is for the fiscal quarter ending March 31, 2022.

The amendment also allows the Company to utilize approximately $ 9.3 million of cash held in FF&E reserve accounts at certain properties for discretionary capital expenditures.

As of March 31, 2021, no loans are in default.

Additionally, the Company did not make rental payments under two ground leases that are paid monthly;

however, the Company executed a forbearance agreement with the landlord of the Bardessono Hotel and Spa and executed a rent deferral letter with the landlord of the Hilton La Jolla Torrey Pines, each of which temporarily resolved any potential events of default arising out of such non-payments.

As of March 31, 2021, the Company is current on its rental payments.

When preparing financial statements for each annual and interim reporting period management has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that create substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

In applying the accounting guidance, the Company considers its current financial condition and liquidity sources, including current funds available, forecasted future cash flows and its unconditional obligations due over the next 12 months.

As of March 31, 2021, the Company maintained unrestricted cash of $ 85.7 million and restricted cash of $ 39.3 million.

As of June 30, 2021, the Company maintained unrestricted cash of $ 157.7 million and restricted cash of $ 57.4 million.

The vast majority of the restricted cash is comprised of lender and manager held reserves.

For the three months ended March 31, 2021, cash flows provided by operating activities was approximately $ 12.0 million.

The Company worked with its property managers and lenders in order to utilize lender and manager held reserves to fund operating shortfalls.

As of March 31, 2021, there was also $ 18.6 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of its property managers which is also available to fund hotel operating costs.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully subside, whether our hotels will be forced to shut down operations or whether one or more governmental entities may impose additional travel restrictions due to a resurgence of COVID-19 cases in the future.

During 2020, the Company worked with its property managers and lenders in order to utilize lender and manager held reserves to fund operating shortfalls.

As of June 30, 2021, there was also $ 21.5 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of its property managers which is also available to fund hotel operating costs.

On December 10, 2020, the Company announced that it plans to continue its suspension of the common stock dividend into 2021 to protect liquidity and will evaluate future dividend declarations on a quarterly basis going forward.

We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully subside, whether our hotels will be forced to shut down operations or whether one or more possible recurrences of COVID-19 case surges could result in further reductions in business and personal travel or potentially cause state and local governments to reinstate travel restrictions.

As a result of these factors resulting from the impact of the pandemic, we are unable to estimate future financial performance with certainty.

However, based on our completed term loan amendment and forbearance and other agreements, our current unrestricted and restricted cash on hand, our current cash utilization and forecast of future operating results for the next 12 months from the date of this report, and the actions we have taken to improve our liquidity, the Company has concluded that management’s current plan alleviates the substantial doubt about its ability to continue as a going concern.

However, based on our completed Convertible Senior Notes transaction (as described below), the corresponding repayment of our secured term loan, which eliminated financial covenants associated with it, our current unrestricted and restricted cash on hand, our current cash utilization and forecast of future operating results for the next 12 months from the date of this report, and the actions we have taken to improve our liquidity, the Company has concluded that the facts and circumstances that previously gave rise to substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued have been resolved.

Facts and circumstances could change in the future that are outside of management’s control, such as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to COVID-19.

14 unchanged sentences

• historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results.

Consequently, operating results for the three months ended March 31, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Consequently, operating results for the three and six months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

5 unchanged sentences

We adopted the standard effective January 1, 2021 and the adoption of this standard did not have a material impact on our consolidated financial statements.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Recently Issued Accounting Standards —In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”).

16 unchanged sentences

We are currently evaluating the impact that ASU 2020-06 may have on our consolidated financial statements and related disclosures.

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

Three Months Ended March 31, 2021

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Three Months Ended June 30, 2021

Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total

9 unchanged sentences

Total 13 $ 63,837 $ 19,853 $ 13,420 $ 97,110

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total

9 unchanged sentences

Total 13 $ 6,533 $ 2,077 $ 4,285 $ 12,895

Six Months Ended June 30, 2021

Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total

California 5 $ 32,097 $ 9,918 $ 4,981 $ 46,996

Colorado 1 7,935 4,192 3,890 16,017

Florida 2 34,226 13,348 10,730 58,304

Illinois 1 4,374 824 403 5,601

Pennsylvania 1 3,657 126 247 4,030

Washington 1 4,074 249 496 4,819

Washington, D.C.

1 3,235 255 495 3,985

USVI 1 28,562 7,570 5,074 41,206

Total 13 $ 118,160 $ 36,482 $ 26,316 $ 180,958

Six Months Ended June 30, 2020

Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total

California 5 $ 25,897 $ 8,041 $ 4,938 $ 38,876

Colorado 1 8,267 4,282 3,239 15,788

Florida 2 17,298 9,360 7,030 33,688

Illinois 1 2,932 889 363 4,184

Pennsylvania 1 5,000 1,206 319 6,525

Washington 1 3,765 791 422 4,978

Washington, D.C.

1 6,526 3,478 882 10,886

USVI 1 7,316 2,833 5,341 15,490

Total 13 $ 77,001 $ 30,880 $ 22,534 $ 130,415

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the three months ended March 31, 2020 the Company recorded revenue from business interruption losses associated with lost profits from Hurricane Irma of $ 3.6 million.

For the three and six months ended June 30, 2020, the Company recorded revenue from business interruption losses associated with lost profits from Hurricane Irma of $ 390,000 and $ 4.0 million, respectively.

This revenue is included in “other” hotel revenue in our condensed consolidated statement of operations.

There was no such revenue recorded for the three months ended March 31, 2021 as the insurance claim was fully settled in 2020.

There was no such revenue recorded for the three and six months ended June 30, 2021 as the insurance claim was fully settled in 2020.

Investments in Hotel Properties, net

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Land $ 455,298 $ 455,298

6 unchanged sentences

Impairment Charges and Insurance Recoveries

For the three months ended March 31, 2021, we recognized a $ 481,000 gain associated with proceeds received from an insurance claim.

For the three months ended March 31, 2020, the Company received proceeds of $ 2.0 million from our insurance carriers for property damage and business interruption from Hurricane Irma.

There were no proceeds for the three months ended March 31, 2021 as the claim was fully settled in September 2020.

During the three months ended March 31, 2021 and 2020, no impairment charges were recorded.

For the three and six months ended June 30, 2021, we recognized a $ 0 and $ 481,000 gain associated with proceeds received from an insurance claim.

For the three and six months ended June 30, 2020, the Company received proceeds of $ 5.4 million and $ 7.4 million from our insurance carriers for property damage and business interruption from Hurricane Irma.

There were no proceeds for the three and six months ended June 30, 2021 as the claim was fully settled in September 2020.

During the three and six months ended June 30, 2021 and 2020, no impairment charges were recorded.

In September 2020, the Company reached a final settlement with its insurance carriers related to Hurricane Irma.

2 unchanged sentences

OpenKey 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, the Company made an initial $ 2.0 million investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an initial 8.2 % ownership interest.

An additional investment of $ 26,000 was made during the three months ended March 31, 2020.

In 2018, the Company made an initial investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an initial 8.2 % ownership interest.

All investments were recommended by our Related Party Transactions Committee and unanimously approved by the independent members of our board of directors.

As of March 31, 2021, the Company has made investments in OpenKey totaling $ 2.4 million.

As of June 30, 2021, the Company has made investments in OpenKey totaling $ 2.4 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 been deemed to have significant influence over the entity under the applicable accounting guidance.

2 unchanged sentences

Any impairment is recorded in equity in earnings (loss) of unconsolidated entity.

No such impairment was recorded for three months ended March 31, 2021 and 2020.

No such impairment was recorded for the three and six months ended June 30, 2021 and 2020.

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Carrying value of the investment in OpenKey (in thousands) $ 1,578 $ 1,708

4 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Line Item 2021 2020 2021 2020

3 unchanged sentences

Indebtedness Collateral Current Maturity Final

Interest Rate March 31, 2021 December 31, 2020

Mortgage loan (3)

The Notary Hotel June 2021 June 2025 LIBOR (1) + 2.16 %

$ 435,000 $ 435,000

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

Maturity (10)

Interest Rate June 30, 2021 December 31, 2020

Mortgage loan (3)

9 unchanged sentences

Mortgage loan (6)

The Notary Hotel June 2022 June 2025 LIBOR (1) + 2.16 %

435,000 435,000

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

Mortgage loan (5)

Bardessono Hotel and Spa August 2022 August 2022 LIBOR (1) + 2.55 %

2 unchanged sentences

Equity October 2022 October 2022 Base Rate (2) + 1.25 % to 2.65 % or LIBOR (1) + 2.25 % to 3.65 %

51,221 61,495

Mortgage loan (5)

11 unchanged sentences

80,000 80,000

Convertible Senior Notes (9)

Equity June 2026 June 2026 4.50 % 86,250 —

1,152,179 1,128,724

1 unchanged sentence

Deferred loan costs, net ( 3,818 ) ( 5,434 )

Discounts, net ( 9,130 ) —

Indebtedness, net $ 1,144,175 $ 1,130,594

__________________

(1) LIBOR rates were 0.111 % and 0.144 % at March 31, 2021 and December 31, 2020, respectively.

(1) LIBOR rates were 0.101 % and 0.144 % at June 30, 2021 and December 31, 2020, respectively.

(2) Base Rate, as defined in the secured term loan agreement, is the greater of (i) the prime rate set by Bank of America, or (ii) federal funds rate + 0.5 %, or (iii) LIBOR + 1.0 %.

(3) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in June 2020.

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

2 unchanged sentences

This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in April 2021.

(6) Effective February 22, 2021, we amended this term loan.

In conjunction with the amendment, the interest rate spread increased from a rate of Base Rate + 1.25 % - 2.50 % or LIBOR + 2.25 % - 3.50 %, with Base Rate + 1.25 % - 2.65 % or LIBOR + 2.25 % - 3.65 %, with a LIBOR floor of 0.50 %.

(5) Effective December 31, 2020, we amended this mortgage loan.

Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through December 2021.

(6) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in June 2021.

(7) Effective February 22, 2021, we amended this term loan.

In conjunction with the amendment, the interest rate spread increased from a rate of Base Rate + 1.25 % - 2.50 % or LIBOR + 2.25 % - 3.50 % to a Base Rate + 1.25 % - 2.65 % or LIBOR + 2.25 % - 3.65 %, with a LIBOR floor of 0.50 %.

On May 18, 2021, we repaid this term loan in full.

(8) Effective March 5, 2021, we amended this mortgage loan.

Terms of the agreement included monthly FF&E escrow deposits waived through July 1, 2021.

(9) On May 18, 2021, we executed a purchase agreement to sell convertible senior notes in a private offering.

In conjunction with the private offering, we sold convertible senior notes with an aggregate principal amount of $ 86.25 million.

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

On June 8, 2020, the Company entered into the First Amendment to the Second Amended and Restated Credit Agreement (the “Amendment”).

The Amendment converted the $ 75 million Second Amended and Restated Credit Agreement, dated October 25, 2019 (the “Credit Facility”), which was a secured revolving credit facility, into a $ 65 million secured term loan.

The Company had borrowed the full borrowing capacity of $ 75 million under the Credit Facility and repaid $ 10 million on June 8, 2020, in connection with the signing of the Amendment.

The Amendment also added principal amortization of $ 5 million per quarter commencing on March 31, 2021.

The Amendment changes the terms of certain financial covenants that the Company was subject to under the Credit Facility.

The Amendment had the same maturity date of October 25, 2022 but removed the two one-year extension options and also removed the Company’s ability to reborrow amounts that have been repaid.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On February 22, 2021, the Company entered into the Second Amendment to the Second Amended and Restated Credit Agreement.

The amendment provides an extension of the waiver on the majority of the covenants through the fourth quarter of 2021 and a reduced fixed charge coverage ratio covenant through the end of 2022.

The first period in which covenants will be tested is for the fiscal quarter ending March 31, 2022.

The amendment also allows the Company to utilize approximately $ 9.3 million of cash held in FF&E reserve accounts at certain properties for discretionary capital expenditures.

As of March 31, 2021, no loans are in default.

Capital Hilton and Hilton La Jolla Torrey Pines.

As of June 30, 2021, no loans are in default.

See note 14 for discussion of the loan modification agreement with Lismore Capital LLC (“Lismore”).

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Additionally, as a result of the troubled debt restructurings all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method.

The amount of principal amortization associated with the default interest and late charges during three months ended March 31, 2021 was approximately $ 1.3 million.

We are required to maintain certain financial ratios under our secured term loan.

The amount of non-cash principal amortization associated with the default interest and late charges during the three and six months ended June 30, 2021 was approximately $ 1.0 million and $ 2.4 million, respectively.

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.

A portion of the proceeds were used to fully repay the secured term loan.

The Convertible Senior Notes are governed by an indenture (the “Base Indenture”) between the Company and U.S.

Bank National Association, as trustee.

The Convertible Senior Notes bear interest at a rate of 4.50 % per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021.

The Convertible Senior Notes will mature on June 1, 2026.

The Company recorded coupon interest expense of $ 464,000 for the three and six months ended June 30, 2021.

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 is not subject to remeasurement or amortization.

The initial discount of $ 9.3 million is 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 $ 185,000 for the three and six months ended June 30, 2021.

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.

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 March 31, 2021, we were in compliance with all covenants.

As of June 30, 2021, we were in compliance with all covenants.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Derivative Instruments

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

Three Months Ended March 31,

Six Months Ended June 30,

Interest rate caps:

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Strike rate high end of range 4.00 % 4.00 %

Effective date range January 2021- March 2021 March 2020

Termination date range September 2021- April 2022 April 2021

Effective date range January 2021- May 2021 March 2020 - June 2020

Termination date range September 2021- June 2022 April 2021 - June 2021

Total cost of interest rate caps (in thousands) $ 79 $ 92

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Interest rate caps:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Notional amount (in thousands) $ 801,000 $ 779,000

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Strike rate high end of range 4.00 % 4.00 %

Termination date range April 2021 - April 2022 February 2021 - October 2021

Termination date range August 2021 - June 2022 February 2021 - October 2021

Aggregate principal balance on corresponding mortgage loans (in thousands) $ 776,000 $ 779,000

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value Measurements

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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 March 31, 2021, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 0.111 % to 0.168 % 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 fair value of interest rate caps as of March 31, 2021 and December 31, 2020 was immaterial.

However, when the valuation adjustments

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 June 30, 2021, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 0.101 % to 0.372 % 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 fair value of interest rate caps as of June 30, 2021 and December 31, 2020 was immaterial.

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

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Gain (Loss) Recognized in Income

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Derivative assets:

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_______________

(1) Excludes costs associated with credit default swaps of $ 0 and $ 63 for the three months ended March 31, 2021 and 2020, respectively, which is included in “other income (expense)” in our condensed consolidated statements of operations.

(1) Excludes costs associated with credit default swaps of $ 0 and $ 64 for the three months ended June 30, 2021 and 2020, respectively, as well as $ 0 and $ 127 for the six months ended June 30, 2021 and 2020, respectively, which is included in “other income (expense)” in our condensed consolidated statements of operations.

(2) Included in “other income (expense)” in our condensed consolidated statements of operations .

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Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Value Estimated

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Value Estimated

Financial assets and liabilities measured at fair value:

Derivative assets $ 1 $ 1 $ — $ —

Financial assets not measured at fair value:

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and due to/from third-party hotel managers .

The carrying values of these financial

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

instruments approximate their fair values due to the short-term nature of these financial instruments.

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.

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Credit spreads take into consideration general market conditions, maturity and collateral.

We estimated the fair value of the total indebtedness to be approximately 80.9 % to 89.5 % of the carrying value of $ 1.1 billion at March 31, 2021, and approximately 78.3 % to 86.6 % of the carrying value of $ 1.1 billion at December 31, 2020.

We estimated the fair value of the total indebtedness to be approximately 77.8 % to 86.0 % of the carrying value of $ 1.1 billion at June 30, 2021, and approximately 78.3 % to 86.6 % of the carrying value of $ 1.1 billion at December 31, 2020.

These fair value estimates are considered a Level 2 valuation technique.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net income (loss) attributable to common stockholders - basic and diluted:

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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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net income (loss) allocated to common stockholders is not adjusted for:

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Loss on extinguishment of preferred stock - Series B 4,411 — 4,484 —

Interest expense on Convertible Senior Notes 649 — 649 —

Total $ 4,846 $ ( 4,040 ) $ 5,403 $ ( 4,195 )

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Effect of assumed conversion of exchanged preferred stock - Series B 905 236 728 298

Effect of assumed conversion of Convertible Senior Notes 6,580 — 3,290 —

Total 15,829 10,809 13,270 11,043

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Redeemable Noncontrolling Interests in Operating Partnership

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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.

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,

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 Company issued equity awards in the first quarter of 2021, a substantial majority of which were issued subject to stockholder approval of an increase in the number of shares available for issuance under the Company’s 2013 Equity Incentive Plan.

Under the applicable accounting literature, these awards are not accounted for until stockholder approval is obtained.

In March 2021, approximately 244,000 LTIP units with a fair value of approximately $ 1.7 million and a vesting period of three years were granted.

Stockholder approval was obtained on May 11, 2021.

On May 11, 2021, approximately 202,000 LTIP units with a fair value of $ 1.4 million and a vesting period of three years were issued.

Additionally, approximately 23,000 LTIP units were issued to independent directors, with a fair value of approximately $ 164,000 , which vested immediately upon grant.

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.

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.

As of March 31, 2021, there were approximately 220,000 Performance LTIP units, representing 200 % of the target, outstanding.

The performance criteria for the Performance LTIP units are based on market conditions under the relevant literature, and the Performance LTIP units were granted to non-employees.

Under the applicable accounting literature, these awards are not accounted for until shareholder approval is obtained.

As of March 31, 2021, we have issued a total of approximately 1.3 million LTIP units (including Performance LTIP units), net of cancellations, all of which, other than approximately 344,000 LTIP units and 60,000 Performance LTIP units issued from March 2015 to March 2021, had reached full economic parity with, and are convertible into, common units.

With respect to the 2019 and 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.

With respect to the 2021 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 commencing on January 1, 2021 and ending on December 31, 2023.

The performance criteria for the 2021 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 grant date 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.

On May 11, 2021, approximately 840,000 Performance LTIP units with a fair value of approximately $ 5.7 million and a vesting period of three years were granted.

As of June 30, 2021, we have issued a total of approximately 2.4 million LTIP units (including Performance LTIP units), net of cancellations, all of which, other than approximately 572,000 LTIP units and 900,000 Performance LTIP units issued from March 2015 to May 2021, 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:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Redeemable noncontrolling interests in Braemar OP $ 29,398 $ 27,655

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

Three Months Ended March 31,

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership $ 1,079 $ 1,885

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership $ 1,282 $ 5,770 $ 2,361 $ 7,655

The following table presents the common units redeemed and the fair value at redemption (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Common units converted to common stock 2 — 2 339

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Equity and Stock-Based Compensation

Common Stock Dividends —The board of directors did no t declare a quarterly common stock dividend for the three months ended March 31, 2021 and 2020 .

Common Stock Dividends —The board of directors did no t declare a quarterly common stock dividend for the three and six months ended June 30, 2021 and 2020 .

Restricted Stock Units —We incur stock-based compensation expense in connection with restricted stock units 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 March 2021, approximately 504,000 restricted stock units with a fair value of approximately $ 3.5 million and a vesting period of three years were granted.

Under the applicable accounting literature, these awards are not accounted for until shareholder approval is obtained.

Performance Stock Units —The compensation committee of the board of directors of the Company may authorize the issuance of grants of PSUs to certain executive officers and directors from time to time.

Under the applicable accounting literature, these awards are not accounted for until stockholder approval is obtained.

In March 2021, approximately 504,000 restricted stock units with a fair value of approximately $ 3.5 million and a vesting period of three years were granted.

Stockholder approval was obtained on May 11, 2021.

On May 11, 2021, approximately 215,000 restricted stock units with a fair value of approximately $ 1.5 million and a vesting period of three years were granted.

Additionally, approximately 46,000 shares of common stock were issued to independent directors, with a fair value of approximately $ 322,000 , which vested immediately upon grant.

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.

The number of PSUs 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 PSUs are based on market conditions under the relevant literature, and the PSUs were granted to non-employees.

The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition as opposed to being accounted for at fair value based on the market price of the shares at each quarterly measurement date.

With respect to the 2019 and 2020 award agreements, the number of PSUs 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 PSUs are based on market conditions under the relevant literature.

Under the applicable accounting literature, these awards are not accounted for until shareholder approval is obtained.

Stockholder approval was obtained on May 11, 2021.

The performance criteria for the 2021 performance grants are based on performance conditions under the relevant literature, and the 2021 performance grants were issued to non-employees.

The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant 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.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On May 11, 2021, approximately 446,000 PSUs with a fair value of approximately $ 6.0 million and vesting period of three years were issued.

8.25 % Series D Cumulative Preferred Stock —The Series D Cumulative Preferred Stock dividend for all issued and outstanding shares is set at $ 2.0625 per annum per share.

The following table summarizes dividends declared (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Series D Cumulative Preferred Stock $ 825 825 $ 1,650 $ 1,650

Stock Repurchases —On December 5, 2017, our board of directors reapproved the 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 million.

The board of directors’ authorization replaced any previous repurchase authorizations.

No shares were repurchased during three months ended March 31, 2021 and 2020.

As of March 31, 2021, $ 50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.

At-the-Market Common Stock Equity Distribution Program —On December 11, 2017, the Company established an “at-the-market” equity distribution program pursuant to which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $ 50 million.

As of March 31, 2021, the Company has sold approximately 6.7 million shares of common stock and received net proceeds of approximately $ 26.2 million under this program.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of June 30, 2021, the Company has sold approximately 7.4 million shares of common stock and received net proceeds of approximately $ 30.5 million under this program.

The issuance activity is summarized below (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Common shares issued 706 — 2,711 —

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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 5 consecutive trading days commencing on the trading day following the date the Company submits an advance notice to YA.

“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.

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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 5 consecutive trading days immediately prior to the date of the Advance Notice (the “Preliminary Purchase Price”).

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 (the “Preliminary Purchase Price”).

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.

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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 March 31, 2021, the Company has sold approximately 1.2 million shares of common stock and received proceeds of approximately $ 7.0 million under the SEDA.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Common shares sold to YA 500 1,700

Proceeds received $ 2,993 $ 10,000

Common Stock Resale Agreement —On April 21, 2021, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”), entered into a purchase agreement, 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 purchase agreement.

Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln Park with certain registration rights related to the shares issued under the Purchase Agreement.

Upon entering into the 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 purchase agreement.

The issuance activity under the Lincoln Park agreement is summarized below (in thousands):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Common shares sold to Lincoln Park 766 766

Additional commitment shares 15 15

Total common shares issued to Lincoln Park 781 781

Proceeds received $ 4,217 $ 4,217

At-the-Market Equity Distribution Agreement —On May 25, 2021, the Company entered into an equity distribution agreement with Virtu Americas LLC (“Virtu”), to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $ 50,000,000 (the “Virtu May 2021 EDA”).

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.

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

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Common shares issued 5,972 5,972

Gross proceeds received $ 36,579 $ 36,579

Commissions and other expenses 366 366

Net proceeds $ 36,213 $ 36,213

The board of directors’ authorization replaced any previous repurchase authorizations.

No shares were repurchased during the six months ended June 30, 2021 and 2020.

As of June 30, 2021, $ 50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.

5.50 % Series B Cumulative Convertible Preferred Stock

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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), the Company may

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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;

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:

2) a special optional redemption, in which on or prior to the occurrence of a Change of Control (as defined), 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 (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.

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

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

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

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

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

On December 4, 2019, we entered into equity distribution agreements with certain sales agents to sell from time to time shares of our Series B Convertible Preferred Stock having an aggregate offering price of up to $ 40.0 million.

Sales of shares of our Series B Convertible Preferred Stock 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 Series B Convertible Preferred Stock, or sales made to or through a market maker other than on an exchange or through an electronic communications network.

Sales of shares of our Series B Convertible Preferred Stock 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 of 1933, as amended (the “Securities Act”), including sales made directly on the NYSE, the existing trading market for our Series B Convertible Preferred 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 Series B Convertible Preferred Stock sold through such sales agents.

As of March 31, 2021, we have sold approximately 65,000 shares of our Series B Convertible Preferred Stock and received proceeds of approximately $ 1.2 million under this program.

As of June 30, 2021, we have sold approximately 65,000 shares of our Series B Convertible Preferred Stock and received proceeds of approximately $ 1.2 million under this program.

The issuance activity is summarized below (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Series B Convertible Preferred Stock shares issued — — — 23

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The following table summarizes dividends declared (in thousands):

Three Months Ended March 31,

Series B Convertible Preferred Stock $ 1,563 $ 1,730

During the three months ended March 31, 2021 , Braemar entered into privately negotiated exchange agreements with certain holders of its 5.50 % Series B Cumulative Convertible Preferred Stock, par value $ 0.01 per share in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended.

The table below summarizes the activity (in thousands):

Three Months Ended March 31, 2021

Preferred Shares Tendered Common Shares Issued

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Series B Convertible Preferred Stock $ 1,068 $ 1,730 $ 2,631 $ 3,460

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

During 2021, Braemar entered into privately negotiated exchange agreements with certain holders of its 5.50 % Series B Cumulative Convertible Preferred Stock, par value $ 0.01 per share in reliance on Section 3(a)(9) of the Securities Act.

The table below summarizes the activity (in thousands):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Preferred Shares Tendered Common Shares Issued Preferred Shares Tendered Common Shares Issued

Series B Convertible Preferred Stock

1,437 5,636 1,923 7,171

Related Party Transactions

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Advisory services fee

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Reimbursable expenses (1)

510 412 1,002 956

Equity-based compensation (2)

2,285 1,917 3,672 3,821

Incentive fee 1,266 — 1,637 —

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Under the advisory agreement, Ashford Inc.

secures casualty insurance policies to cover Braemar, Ashford Trust, their hotel managers, as needed, and 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 risk management department manages the casualty insurance program.

At the beginning of each year, Ashford Inc.'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.

Lismore Advisory Fee

On March 20, 2020, the Company entered into an agreement with Lismore, a subsidiary of Ashford Inc., to engage Lismore to seek modifications, forbearances or refinancings of the Company’s loans (the “Lismore Agreement”).

The Lismore Agreement was terminated effective March 20, 2021.

At the beginning of each year, Ashford Inc.'s risk

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

The Lismore Agreement was terminated effective March 20, 2021.

Upon entering into the agreement with Lismore, the Company made an initial payment of approximately $ 1.4 million.

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In total the Company paid approximately $ 4.1 million under the Lismore Agreement.

For the three months ended March 31, 2021 and 2020, the Company has recognized expense of $ 341,000 and $ 0 , respectively, which is included in “write-off of loan costs and exit fees” in our condensed consolidated statements of operations.

For the three and six months ended June 30, 2021, the Company recognized expense of $ 0 and $ 341,000 , respectively.

For the three and six months ended June 30, 2020, the Company recognized expense of $ 1.6 million.

These expenses are included in “write-off of loan costs and exit fees” in the condensed consolidated statements of operations.

Ashford Securities

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announced the formation of Ashford Securities LLC (“Ashford Securities”) to raise retail capital in order to grow its existing and future platforms.

In conjunction with the formation of Ashford Securities, Braemar has entered into a contribution agreement with Ashford Inc.

pursuant to which Braemar has agreed to contribute, with Ashford Hospitality Trust, Inc.

(“Ashford Trust”), up to $ 15.0 million to fund the operations of Ashford Securities.

In conjunction with the formation of Ashford Securities, Braemar has entered into a contribution agreement (the “Initial Contribution Agreement”) with Ashford Inc.

pursuant to which Braemar has agreed to contribute, with Ashford Trust, up to $ 15.0 million to fund the operations of Ashford Securities.

Costs for all operating expenses of Ashford Securities that were contributed by Ashford Trust and Braemar will be expensed as incurred.

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After the Initial True-Up Date, the capital contributions will be allocated between Ashford Trust and Braemar quarterly based on the actual capital raised through Ashford Securities.

On December 31, 2020, an Amended and Restated Contribution Agreement was entered into by Ashford Inc., Ashford Trust and Braemar with respect to expenses to be reimbursed by 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 with respect to expenses to be reimbursed by Ashford Securities.

The Initial True-Up Date did not occur, and beginning on the effective date of the Amended and Restated Contribution Agreement, costs will be allocated based upon an allocation percentage of 50 % to Ashford Inc., 50 % to Braemar and 0 % to Ashford Trust.

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Additionally, Braemar’s aggregate Capital Contributions under the Initial Contribution Agreement and the Amended and Restated Contribution Agreement shall not exceed $ 3.75 million unless otherwise agreed to in writing by Braemar.

As of March 31, 2021, Braemar has funded approximately $ 1.3 million.

Additionally, as of March 31, 2021, the Company has a payable of $ 114,000 , included in “due to Ashford Inc.” on our condensed consolidated balance sheet that represents unfunded reimbursable expenses.

As of June 30, 2021, Braemar has funded approximately $ 1.9 million.

Additionally, as of June 30, 2021, the Company has a payable of $ 17,000 , included in “due to Ashford Inc.” on our condensed consolidated balance sheet that represents unfunded reimbursable expenses.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Line Item 2021 2020 2021 2020

Corporate, general and administrative $ 523 $ 97 $ 863 $ 330

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Enhanced Return Funding Program

Concurrent with the Amendment No.

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.

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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, project management and other services offered by 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.

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and Braemar, respectively.

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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).

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or Braemar provides written notice to the other at least sixty 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.

Project Management Agreement

In connection with Ashford Inc.’s August 8, 2018 acquisition of Remington Lodging’s project management business, we entered into a project management agreement with Ashford Inc.’s subsidiary, Premier Project Management LLC (“Premier”), pursuant to which Premier provides project management 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 project management agreement, we pay Premier:

(a) project management fees of up to 4 % of project costs;

and (b) for the following services as follows:

During the second quarter of 2021, the Company sold approximately $ 1.6 million of hotel FF&E from Braemar hotel properties to Ashford LLC which was subsequently leased back to the Company rent-free.

In accordance with ASC 842, the Company evaluated the transactions and concluded that the transactions qualified as sales.

As a result, the Company recorded an aggregate gain of $ 197,000 for the three and six months ended June 30, 2021.

The gains are recorded in “gain (loss) on insurance settlement, disposition of assets and sale of hotel properties” in our condensed consolidated statements of operations.

In the second quarter of 2021, upon expiration of an ERFP lease, the Company purchased the underlying FF&E from Ashford Inc.

for $ 144,000 .

As of June 30, 2021, the Company has recorded a payable of $ 144,000 included in "due to Ashford Inc." on the condensed consolidated balance sheet.

Design and Construction Services

In connection with Ashford Inc.’s August 8, 2018 acquisition of Remington Lodging’s design and construction business, we entered into a design and construction services agreement with Ashford Inc.’s subsidiary, Premier Project Management LLC (“Premier”), pursuant to which Premier 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);

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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 project management 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 Agreement

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

On November 6, 2019, Ashford Inc.

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Following the acquisition, hotel management services are provided by Remington Hotels, a subsidiary of Ashford Inc., under the respective hotel management agreement with each customer, including Ashford Trust and Braemar.

At March 31, 2021, Remington Hotels managed three of our thirteen hotel properties.

We pay monthly hotel management fees equal to the greater of approximately $ 14,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues as well as annual incentive management fees, if certain operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

At June 30, 2021, Remington Hotels managed three of our thirteen hotel properties.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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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.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Ashford Trust

As of June 30, 2021, the Company has an $ 800,000 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.

The $ 800,000 gain is included in “(gain) loss on legal settlements” on the condensed consolidated statements of operations.

Commitments and Contingencies

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at March 31, 2021, escrow payments are required for insurance, real estate taxes and debt service.

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at June 30, 2021, 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 % to 5 % of gross revenues for capital improvements.

Management Fees —Under hotel management agreements for our hotel properties existing at March 31, 2021, we pay a monthly hotel management fee equal to the greater of approximately $ 14,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, or in some cases 2.5 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

Management Fees —Under hotel management agreements for our hotel properties existing at June 30, 2021, we pay a monthly hotel management fee equal to the greater of approximately $ 14,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, or in some cases 2.5 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

These management agreements expire from December 2023 through December 2065, with renewal options.

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Tax years 2017 through 2020 remain subject to potential examination by certain federal and state taxing authorities.

Litigation —On October 24, 2019, the Company provided notice to Accor of the material breach of its responsibilities under the Accor management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago, Illinois.

Litigation —On October 24, 2019, the Company provided notice to Accor of the material breach of Accor’s responsibilities under the Accor management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago, Illinois.

On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York County, seeking a declaratory judgment that no breach has occurred.

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Second, Accor asserts a counterclaim for breach of contract on the basis that Ashford TRS Chicago II breached the 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 .

As of March 31, 2021, no amounts have been accrued.

As of June 30, 2021, no amounts have been accrued.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

One of the Company’s hotel management companies is currently involved in litigation regarding its employment policies and practices at multiple California hotels, including one of the Company’s hotels.

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however, it is entitled to indemnification for a portion of such loss.

As of March 31, 2021, approximately $ 500,000 has been accrued.

As of June 30, 2021, approximately $ 500,000 has been accrued.

In June 2020, each of the Company, Ashford Trust, Ashford Inc., and Lismore, a subsidiary of Ashford Inc.

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Bennett are responding to the administrative subpoenas.

A class action lawsuit has been filed against one of the Company’s hotel management companies alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company.

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:

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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.

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 any potential loss to the Company is reasonably estimable at this time.

As of March 31, 2021, no amounts have been accrued.

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 any potential loss to the Company is reasonably estimable at this time.

As of June 30, 2021, no amounts have been accrued.

We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated.

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We report operating results of direct hotel 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 March 31, 2021 and December 31, 2020, all of our hotel properties were in the U.S.

As of June 30, 2021 and December 31, 2020, all of our hotel properties were in the U.S.

and its territories.

Subsequent Events

From April 1, 2021 through May 5, 2021, Braemar entered into privately negotiated exchange agreements with certain holders of its Series B Convertible Preferred Stock in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended.

The Company agreed to exchange a total of approximately 2.9 million shares of its common stock for approximately 751,000 shares of its Series B Convertible Preferred Stock.

On April 2, 2021, the Company filed with the State Department of Assessments and Taxation of the State of Maryland 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 Redeemable Preferred Stock (the “Series E Preferred Stock”) and 28,000,000 shares of Series M Redeemable Preferred Stock (the “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”).

These new Series E Articles Supplementary and Series M Articles Supplementary were filed to revise the preferred stock terms related to the dividend rate, the Company’s 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 to conform to the terms of its Series E Articles Supplementary and Series M Articles Supplementary.

As of May 5, 2021, no shares of Series E Preferred Stock or Series M Preferred Stock have been issued.

On April 21, 2021, Braemar and Lincoln Park Capital Fund, LLC (“Lincoln Park”), entered into a purchase agreement, pursuant to which the Company may sell to Lincoln Park up to $ 35 million of shares of its common stock, from time to time during the term of the purchase agreement.

The issuance of the shares of common stock pursuant to the purchase agreement has been registered pursuant to the Company’s effective shelf registration statement on Form S-3 (File No.

333-254588) (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.

Braemar and Lincoln Park also entered into a registration rights agreement, pursuant to which the Company agreed to maintain the effectiveness of the Registration Statement.

On April 21, 2021, we issued 280,957 shares of our common stock for gross proceeds of approximately $ 1.5 million.

On July 12, 2021, the Company entered into a second equity distribution agreement with Virtu to sell from time to time shares of our common stock having an aggregate offering price of up to $ 100 million (the “Virtu July 2021 EDA”).

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 August 4, 2021, the Company has not sold any shares of common stock under the Virtu July 2021 EDA.

On July 12, 2021, the Company made an additional investment in OpenKey of approximately $ 117,000 .

Subsequent to June 30, 2021, the Company has sold approximately 86,000 shares of Series E Preferred Stock and received net proceeds of approximately $ 1.9 million.

On August 5, 2021, the Company acquired a 100 % interest in the 138 -room Mr.

C Beverly Hills Hotel and five luxury condominium residences adjacent to the hotel for total consideration of approximately $ 74 million, subject to adjustments.

The consideration consisted of $ 10 million of cash, 2.5 million Braemar OP common units, 500,000 warrants for the purchase of Braemar common stock with a $ 6.00 strike price and the assumption of a $ 50 million mortgage loan.

Upon closing, the Company repaid $ 20 million of the assumed mortgage loan.

As a result of the recent date of the transaction, it is impractical to provide the pro forma results of operations that include the impact of the acquisition.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements