What changed in this filing

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Item 1A. Risk Factors

2022-03-10 compared with 2021-03-05 · 120 added, 196 removed, 878 unchanged (26% of the section changed)

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These risks are discussed more fully below and include, but are not limited to, risks related to:

• adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and travel restrictions in regions where our hotels are located, and one or more possible recurrences of COVID-19 cases causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or local governments;

• the impact of the ongoing COVID-19 pandemic, including the resurgence of cases relating to the spread of the Delta, Omicron or other potential variants, on our business, financial condition, liquidity and results of operations;

• adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and travel restrictions in regions where our hotels are located, and one or more possible recurrences of COVID-19 case surges causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or local governments;

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

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

• our ability to implement effective internal controls to address the material weakness identified in this report;

• the timing or outcome of the SEC investigation;

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

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This characteristic may result from the fact that luxury hotels generally target business and high-end leisure travelers.

In periods of economic difficulties or concerns with respect to communicable disease, business and leisure travelers may seek to reduce

travel costs and/or health risks by limiting travel or seeking to reduce costs on their trips.

of economic difficulties or concerns with respect to communicable disease, business and leisure travelers may seek to reduce travel costs and/or health risks by limiting travel or seeking to reduce costs on their trips.

Any economic recession will likely have an adverse effect on our business, operating results and prospects.

Our business has been and will continue to be materially affected by the impact of the COVID-19 pandemic, see the risk factor “The outbreak of COVID-19 has and will continue to significantly reduce our occupancy rates and RevPAR.”

As a result of the impact of the COVID-19 pandemic, our ability to continue to have the liquidity necessary to service our debt, meet contractual payment obligations under our loan and forbearance agreements and fund our operations depends on many factors and we are unable to estimate future financial performance with certainty.

As a result of the suspension of operations at some of our hotels and the severe decline in revenues resulting from the COVID-19 pandemic, 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 agreement.

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.

Such Event of Default under the senior revolving credit facility agreement was eliminated by the First Amendment to Second Amended and Restated Credit Agreement, dated June 8, 2020, which provides that defaults under mortgage and mezzanine loans with an aggregate principal amount in excess of $200 million do not trigger a default under the senior 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.

As previously disclosed on September 24, 2020, the Company signed a forbearance agreement on its mortgage loan on the Capital Hilton and Hilton La Jolla Torrey Pines.

The forbearance agreement allowed the Company to defer interest on the loan for a period of six months through the September payment date.

The forbearance agreement also allowed the Company to utilize lender and manager-held reserve accounts, which are included in restricted cash on the Company’s balance sheet, in order to fund operating shortfalls at the hotels.

As of the date of this filing, we have entered into forbearance and other agreements with varying terms and conditions that conditionally waive or defer payment defaults for our property level secured debt.

If we fail to make any required payments or breach any covenants, we may trigger an Event of Default under our respective forbearance agreements.

In such event, we would seek to negotiate new forbearance agreements.

If we are unsuccessful in negotiating such forbearance agreements, the lenders could potentially accelerate payments or foreclose on our assets.

A foreclosure may also result in reputational risks with lenders that could make it more difficult, or more costly, to obtain loans in the future.

As of December 31, 2020, the Company maintained unrestricted cash of $78.6 million and restricted cash of $34.5 million.

During the three months ended December 31, 2020, we utilized cash, cash equivalents and restricted cash of $9.7 million.

Based on certain circumstances, it is possible that the Company could utilize all of its cash, cash equivalents and restricted cash within the next twelve months.

We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic 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.

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

There can be no assurances that in the future we will be able to timely service our debt, meet other contractual payment obligations or fund our other liquidity needs for any reason, and in such event, we would need to seek additional waivers of or amendments to our contractual obligations for payment, reduce or delay scheduled capital expenditures, sell material assets or seek alternative financing.

The occurrence of any of the foregoing could have a material adverse impact on our liquidity, financial conditions and ability to continue as a going concern.

We are dependent on the services provided by our advisor, Ashford Inc., and there is a substantial doubt about our advisor’s ability to continue as a going concern.

We have no employees.

Our appointed officers are provided by our advisor, and employees of our advisor perform various services pursuant to the advisory agreement and other agreements that enable us to run our business, including acquisition, asset management, capital markets, accounting, tax, risk management, legal, redevelopment, and other corporate management services and functions.

Our advisor has publicly disclosed that it had a negative $49.3 million working capital position as of September 30, 2020 and that, as a result of the effect of the COVID-19 pandemic on our advisor’s business and its financial condition, there is a substantial doubt about our advisor’s ability to continue as a going concern.

If as a result of our advisor’s

financial condition the level or quality of the services our advisor provides were materially to decline, it would impair our business and potentially lead to disputes with our advisor.

If our advisor were to suffer certain insolvency events (including by declaring bankruptcy), we would be permitted to terminate our advisory agreement without payment of a termination fee to our advisor, but entering into an advisory arrangement with a replacement advisor would be highly disruptive to our operations and would likely have a material adverse effect on our ability to operate our business.

We did not pay dividends on our common stock in fiscal year 2020 and do not expect to pay dividends on our common stock for the foreseeable future, and we may not pay dividends on our preferred stock in the future, particularly in light of the downturn in our business occasioned by the COVID-19 pandemic and the demands of our property-level lenders.

Our board of directors decides each quarter whether to pay dividends on our common or preferred stock, based on a variety of factors deemed relevant by our directors, including the current business environment, overall funding levels, other contractual obligations and expected future business conditions.

If we continue to fail to pay dividends on our common stock, the market price of our common stock will likely be adversely affected.

In light of the downturn of our business and Ashford Inc.’s business occasioned by COVID-19, we may not realize the anticipated benefits of the Enhanced Return Funding Program.

On January 15, 2019, we entered into the Enhanced Return Funding Program Agreement and Amendment No.

1 to the Fifth Amended and Restated Advisory Agreement (the “ERFP Agreement”) with Ashford Inc.

and Ashford LLC, which generally provides that Ashford LLC will provide funding to facilitate the acquisition of properties by us 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).

In light of the downturn of our business and Ashford Inc.’s business occasioned by COVID-19, we may not realize the anticipated benefits of the ERFP Agreement.

Specifically, as of the date of this filing, Ashford LLC has a remaining commitment to provide approximately $39.7 million in ERFP funding to us in respect of its initial $50 million commitment under the ERFP Agreement.

Ashford LLC, however, is not required to commit to provide funding under the ERFP Agreement if its unrestricted cash balance, after taking into account the cash amount required for such funding, would be less than $15.0 million.

Given the significant negative impact that COVID-19 has had on the business of Ashford Inc.

and Ashford LLC, it is uncertain whether Ashford LLC will be able to provide us with this additional funding, either because Ashford LLC’s unrestricted cash balance falls below $15.0 million or Ashford LLC is otherwise financially unable or unwilling to provide such funding.

Furthermore, if Ashford Inc.

and Ashford LLC do not fulfill their contractual obligations pursuant to the ERFP Agreement, we may choose not to enforce, or to enforce less vigorously, our rights because of our desire to maintain our ongoing relationship with Ashford Inc.

and Ashford LLC, and legal action against either party could negatively impact that relationship.

Additionally, under the terms of the ERFP Agreement, we are required on a going forward basis to pay asset management fees to our advisor, Ashford Inc., with respect to any hotel purchased with money funded pursuant to the ERFP Agreement, even after such hotel is disposed of, including as a result of foreclosure.

As a result, if any hotel purchased with funds provided pursuant to the ERFP Agreement is foreclosed upon or otherwise disposed of , we will still be obligated to pay Ashford Inc.

asset management fees as if we continued to own the hotels.

Our business has been and will continue to be materially affected by the impact of the COVID-19 pandemic, see the risk factor “The outbreak of COVID-19 has and will continue to reduce our occupancy rates and RevPAR.”

We did not pay dividends on our common stock in fiscal years 2020 and 2021 and we may not pay dividends on our common stock or preferred stock in the future.

We did not pay dividends on our common stock in fiscal years 2020 and 2021.

On January 10, 2022, our board of directors declared dividends on our preferred stock for the first quarter of 2022 in the amount that such holders of our preferred stock are entitled to receive.

On March 4, 2022, our board of directors declared a quarterly cash dividend of $0.01 per diluted share for the Company’s common stock for the first quarter of 2022.

Additionally, in March 2022, the board of directors approved an update to our previously announced dividend policy for 2022 to revise our then-expectation to pay a quarterly dividend of $0.01 per share of common stock during 2022.

The approval of our dividend policy does not commit our board of directors to declare future dividends with respect to any quantity or the amount thereof and the board of directors may decide not to pay any dividends on our common stock and/or preferred stock.

We may not pay dividends on our common stock or preferred stock in the future, particularly in light of the downturn in our business occasioned by the COVID-19 pandemic and the demands of our property-level lenders.

If we fail to pay dividends on our common stock or preferred stock, the market price of our common stock or preferred stock will likely be adversely affected.

We are required to make minimum base advisory fee payments to our advisor, Ashford Inc., under our advisory agreement, which must be paid even if our total market capitalization and performance decline.

Similarly, we are required to make minimum base hotel management fee payments under our hotel management agreements with Remington Hotels, a subsidiary of Ashford Inc., which must be paid even if revenues at our hotels decline significantly.

Pursuant to the advisory agreement between us and our advisor, we must pay our advisor on a monthly basis a base advisory fee (based on our total market capitalization and performance), subject to a minimum base advisory fee.

Pursuant to the advisory agreement between us and our advisor, we must pay our advisor on a monthly basis a base advisory fee (based on our total market capitalization), subject to a minimum base advisory fee.

The minimum base advisory fee is equal to the greater of:

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and (ii) 1/12th of the “G&A Ratio” for the most recently completed fiscal quarter multiplied by our total market capitalization on the last balance sheet date included in the most recent quarterly report on Form 10-Q or annual report on Form 10-K that we file with the SEC.

Thus, even if our total market capitalization and performance decline, including as a result of the impact of COVID-19, we will still be required to make monthly payments to our advisor equal to the minimum base management fee (which we expect will equal 90% of the base fee paid for the same month in the prior fiscal year), which could adversely impact our liquidity and financial condition.

Thus, even if our total market capitalization and performance decline, including as a result of the impact of COVID-19, we will still be required to make monthly payments to our advisor equal to the minimum base management fee, which could adversely impact our liquidity and financial condition.

Similarly, pursuant to our hotel management agreement with Remington Hotels, a subsidiary of Ashford Inc., we pay Remington Hotels monthly base hotel management fees on a per hotel basis equal to the greater of approximately $15,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues.

As a result, even if revenues at our hotels decline significantly, we will still be required to make minimum monthly payments to Remington Hotels equal to approximately $15,000 per hotel (increased annually based on consumer price index adjustments), which could adversely impact our liquidity and financial condition.

We face risks related to an ongoing Securities and Exchange Commission investigation.

In June 2020, each of the Ashford Companies received an administrative subpoena from the SEC.

The Company’s administrative subpoena requires the production of documents and other information since January 1, 2018 relating to, among other things, (1) related party transactions among the Ashford Companies (including the Lismore Agreement between the Company and Lismore pursuant to which the Company engaged Lismore to negotiate the refinancing, modification or forbearance of certain mortgage debt) or between any of the Ashford Companies and any officer, director or owner of the Ashford Companies or any entity controlled by any such person, and (2) the Company’s accounting policies, procedures, and internal controls related to such related party transactions.

In addition, in October 2020, Mr.

Bennett, chairman of our board of directors, received an administrative subpoena from the SEC requiring testimony and the production of documents and other information substantially similar to the requests in the subpoenas received by the Ashford Companies.

The Company and Mr.

Bennett are responding to the administrative subpoenas.

At this point, we are unable to predict what the timing or the outcome of the SEC investigation may be or what, if any, consequences the SEC investigation may have with respect to the Company.

However, the SEC investigation could result in considerable legal expenses, divert management’s attention from other business concerns and harm our business.

If the SEC were to determine that legal violations occurred, we could be required to pay significant civil and/or criminal penalties or other amounts and remedies or conditions could be imposed as part of any resolution.

We can provide no assurances as to the outcome of the SEC investigation.

We identified a material weakness in our internal controls over financial reporting that existed for the period ended December 31, 2020.

Although the Company designed a new control that we intended to remediate this material weakness whereby management will engage a third-party accounting expert to assist management in assessing the accounting for similar transactions in its consolidated financial statements, it was not possible for the Company to test whether the new control was designed and operating effectively as of December 31, 2020 because there were no similar transactions to evaluate in the fourth quarter of 2020.

If we fail to properly remediate this material weakness, or fail to properly identify or remediate any future weaknesses or deficiencies, or achieve and maintain effective internal control, our ability to produce accurate and timely financial statements or comply with applicable laws and regulations could be impaired and investors could lose confidence in our financial statements.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

As discussed in “Item 9A.

Controls and Procedures,” we became aware of a deficiency in the operating effectiveness of our controls that led to a misstatement in our consolidated financial statements for the three and nine months ended September 30, 2020, related to the accounting for troubled debt restructurings.

We have corrected the misstatement;

however, the lack of proper controls resulted in a material weakness in internal control over financial reporting as defined in Public Company Accounting Oversight Board Auditing Standard No.

To prevent future material weaknesses from arising in similar circumstances, during the fourth quarter of 2020, the Company designed a new control whereby management will engage a third-party accounting expert to assist management in assessing the accounting for similar transactions in its consolidated financial statements.

However, the Company did not enter into any similar transactions during the fourth quarter of 2020, and therefore it was not possible for the Company to test whether the new control was designed and operating effectively as of December 31, 2020.

As a result, the material weakness still exists as of December 31, 2020.

We anticipate that our remedial actions will have a material impact on our internal control over financial reporting in future periods, but because there were no similar transactions to evaluate in the fourth quarter of 2020 and the timing on when we can remediate this material weakness is dependent on the Company entering into similar transactions, we can give no assurance as to when it will be completed.

Additionally, when a similar transaction does occur at the Company, there can be no assurance that our new control will be sufficient to address this material weakness or that our internal control over financial reporting will not be subject to additional material weaknesses or significant deficiencies in the future.

If the remedial actions that we are taking and may take in the future are insufficient to address the material weakness or if additional material weaknesses or significant deficiencies in our

internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements, we could be required to restate our financial results, our access to capital markets may be affected, we may be unable to maintain or regain compliance with applicable securities laws and NYSE listing requirements, and we may be subject to regulatory investigations and penalties.

Additionally, we may encounter problems or delays in implementing any additional changes necessary for management to make a favorable assessment of our internal control over financial reporting.

If we cannot favorably assess the effectiveness of our internal control over financial reporting, investors could lose confidence in our financial information and the price of our common or preferred stock could decline.

Our business is significantly influenced by the economies and other conditions in the specific markets in which we operate, particularly in the metropolitan areas where we have high concentrations of hotels.

Our hotels are located in the Washington D.C., San Francisco, San Diego, Sarasota, Seattle, Philadelphia, Chicago, Key West, Vail/Beaver Creek, Lake Tahoe and St.

Our hotels are located in the Washington, D.C., San Francisco, San Diego, Sarasota, Seattle, Philadelphia, Chicago, Key West, Vail/Beaver Creek, Lake Tahoe, Los Angeles and St.

Thomas metropolitan areas.

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Any adverse changes in the financial condition of Ashford LLC, or its affiliates or our relationship with Ashford LLC could hinder its ability to manage us successfully.

Also, see the risk factor “In light of the downturn of our business and Ashford Inc.’s business occasioned by COVID-19, we may not realize the anticipated benefits of the Enhanced Return Funding Program.”

We depend on Ashford LLC’s key personnel with long-standing business relationships.

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Bennett, Richard J.

Stockton, Robert G.

Haiman, Deric S.

Stockton, Alex Rose, Deric S.

Eubanks, Jeremy Welter, Mark L.

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We own interests in two hotels through a joint venture and we do not have sole decision-making authority regarding these two properties.

In addition, we may continue to co-invest with third parties through partnerships, joint ventures or other entities, acquiring controlling or noncontrolling interests in, or sharing responsibility for, managing the affairs of a property, partnership, joint venture or other entity.

In addition, we may continue to co-invest with third parties through partnerships, joint ventures or other entities,

acquiring controlling or noncontrolling interests in, or sharing responsibility for, managing the affairs of a property, partnership, joint venture or other entity.

We may not be in a position to exercise sole decision-making authority regarding any future properties that we may hold in a partnership or joint venture.

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Franchisors or managers may also require us to make certain capital improvements to maintain the hotel in accordance with system standards, the cost of which can be substantial.

A franchisor or manager could condition the continuation of branding and operational support based on the completion of capital improvements that Ashford LLC or our board of directors determines is not economically feasible in light of general economic conditions, the

operating results or prospects of the affected hotel or other circumstances.

In that event, Ashford LLC or our board of directors may elect to allow the franchise or management agreement to lapse or be terminated, which could result in a termination charge as well as a change in branding or operation of the hotel as an independent hotel.

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federal income tax laws restrict REITs and their subsidiaries from operating or managing hotels, third parties must operate our hotels.

A REIT may lease its hotels to taxable REIT subsidiaries (“TRSs”) in which the REIT can own up to a 100% interest.

A REIT may lease its hotels to TRSs in which the REIT can own up to a 100% interest.

A TRS pays corporate-level income tax and may retain any after-tax income.

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We are parties to hotel management agreements under which unaffiliated third-party hotel managers manage our hotels.

We have also entered into a master hotel management agreement with Remington Hotels, a subsidiary of Ashford Inc., pursuant to which Remington Hotels currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa and Hotel Yountville.

C Beverly Hills Hotel.

We do not supervise any of the hotel managers or their respective personnel on a day-to-day basis.

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Accor’s complaint was dismissed on or about February 27, 2020.

On January 6, 2020, Ashford TRS Chicago II filed a complaint against Accor in the Supreme Court of the State of New York, New York County, alleging breach of the Accor management agreement and seeking declaration of its right to

terminate the Accor management agreement.

On July 20, 2020, Accor filed an Amended Answer and Counterclaims against Ashford TRS Chicago II.

For more information, see “Item 3.

Legal Proceedings.”

On February 23, 2022, Ashford TRS Chicago II and Accor filed a stipulation of discontinuance dismissing all claims, counterclaims, and cross-claims in the January 6, 2020 action with prejudice.

Our management agreements could adversely affect our ability to sell or finance our hotel properties.

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therefore, we are subject to risks associated with concentrating our portfolio in just two brand families.

Eight of our thirteen hotels utilize brands owned by Marriott (or its affiliates) or Hilton (or its affiliates).

Eight of our 14 hotels utilize brands owned by Marriott (or its affiliates) or Hilton (or its affiliates).

As a result, our success is dependent in part on the continued success of Marriott and Hilton and their respective brands (or the brands of their affiliates).

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and international laws and regulations, including the United States Foreign Corrupt Practices Act (“FCPA”).

Before we invest in international markets, we will adopt policies and procedures designed to promote compliance with the FCPA and other anti-corruption laws, but we may not continue to be found to be operating in compliance with, or be able to detect violations of, any such laws or regulations.

Before we invest in international markets, we will adopt policies and procedures designed to promote compliance with the FCPA and other anti-corruption laws, but we may

not continue to be found to be operating in compliance with, or be able to detect violations of, any such laws or regulations.

In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international properties might be subject and the manner in which existing laws might be administered or interpreted.

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The continuing evolution of social media will present us with new challenges and risks.

We may experience losses caused by severe weather conditions, natural disasters or the effects of climate change.

Our properties are susceptible to revenue loss, cost increase or damage caused by severe weather conditions or natural disasters such as hurricanes, earthquakes, tornadoes and floods, as well as the effects of climate change.

To the extent climate change causes changes in weather patterns, our hotel properties could experience increases in storm intensity and rising sea-levels.

We may experience losses caused by severe weather conditions or natural disasters.

Our properties are susceptible to extreme weather conditions, which may cause property damage or interrupt business, which could harm our business and results of operations.

Certain of our hotels are located in areas that may be subject to extreme weather conditions, including, but not limited to, hurricanes, floods, tornados and winter storms in the United States and the Caribbean.

Such extreme weather conditions may interrupt our operations, damage our hotels, and reduce the number of guests who visit our hotels in such areas.

In addition, our operations could be adversely impacted by a drought or other cause of water shortage.

A severe drought of extensive duration experienced in California or in the other regions in which we operate or source critical supplies could adversely affect our business.

Over time, these conditions could result in declining hotel demand, significant damage to our properties or our inability to operate the affected hotels at all.

We believe that our properties are adequately insured, consistent with industry standards, to cover reasonably anticipated losses that may be caused by hurricanes, earthquakes, tornadoes, floods and other severe weather conditions and natural disasters, including the effects of climate change.

We believe that our properties are adequately insured, consistent with industry standards, to cover reasonably anticipated losses that may be caused by hurricanes, earthquakes, tornados, floods and other severe weather conditions and natural

Nevertheless, we are subject to the risk that such insurance will not fully cover all losses and, depending on the severity of the event and the impact on our properties, such insurance may not cover a significant portion of the losses including but not limited to the costs associated with evacuation.

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In addition, we may not purchase insurance under certain circumstances if the cost of insurance exceeds, in our judgment, the value of the coverage relative to the risk of loss.

Also, changes in federal and state legislation and regulation relating to climate change could result in increased capital expenditures to improve the energy efficiency and resiliency of our existing properties and could also necessitate us to spend more on our new development properties without a corresponding increase in revenue.

Changes in laws, regulations or policies may adversely affect our business.

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Any such action could affect us in substantial and unpredictable ways and could have an adverse effect on our results of operations and financial condition.

Our inability to remain in compliance with

regulatory requirements in a particular jurisdiction could have a material adverse effect on our operations in that market and on our reputation generally.

Our inability to remain in compliance with regulatory requirements in a particular jurisdiction could have a material adverse effect on our operations in that market and on our reputation generally.

Applicable laws or regulations may be amended or construed differently and new laws and regulations may be adopted, either of which could materially adversely affect our business, financial condition, or results of operations.

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Generally, our mortgage debt carries maturity dates or call dates such that the loans become due prior to their full amortization.

It may be difficult to refinance or extend the maturity of such loans on terms acceptable to us, or at all, and we may not have sufficient borrowing capacity on our secured revolving credit facility to repay any amounts that we are unable to refinance.

Although we believe that we will be able to refinance or extend the maturity of these loans, or will have the capacity to repay them, if necessary, using draws under our secured revolving credit facility, there can be no assurance that our secured revolving credit facility will be available to repay such maturing debt, as draws under our secured revolving credit facility are subject to limitations based upon our unencumbered assets and certain financial covenants.

It may be difficult to refinance or extend the maturity of such loans on terms acceptable to us, or at all.

These conditions could adversely affect our financial position, results of operations, and cash flows or the market price of our stock.

Under our advisory agreement, Ashford LLC is entitled to receive a monthly base fee in an amount equal to 1/12th of the sum of (i) 0.70% of the total market capitalization of our company for the prior month, and (ii) the Net Asset Value Fee Adjustment, which is defined in the advisory agreement to include our indebtedness and other factors.

Under our advisory agreement, Ashford LLC is entitled to receive a monthly base fee in an amount equal to 1/12th of the sum of (i) 0.70% of the total market capitalization of our company for the prior month, and (ii) the Net Asset Fee Adjustment, which is defined in the advisory agreement to include our indebtedness and other factors.

This fee increases as the aggregate principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not consolidated but excluding our joint venture partners’ proportionate share of consolidated debt) increases.

As a result, any increase in our consolidated indebtedness will also increase the fees we pay to Ashford LLC.

The structure of this fee may

incentivize Ashford LLC to recommend we increase our indebtedness, thereby increasing the fee, when it may not be in the best interest of our stockholders to do so.

The structure of this fee may incentivize Ashford LLC to recommend we increase our indebtedness, thereby increasing the fee, when it may not be in the best interest of our stockholders to do so.

In addition, changes in economic conditions, our financial condition or operating results or prospects could:

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Moreover, periods of rising interest rates heighten the risks described immediately above under “We have a significant amount of debt, and our organizational documents have no limitation on the amount of additional indebtedness that we may incur in the future.”

We have defaulted on our property level secured debt and, although we have entered into forbearance or other agreements on our property level secured debt, if we are unable to comply with such agreements, the lenders may foreclose on our hotels.

All of the Company’s properties are pledged as collateral for a variety of loans.

On or about March 17, 2020, we sent notice to all of our lenders notifying such lenders that the spread of COVID-19 was having a significant negative impact on the travel and hospitality industry and that our hotels were experiencing a severe decrease in revenue, resulting in a negative impact on cash flow.

While our loan agreements do not contain forbearance rights, we requested a modification to the terms of the loans.

Specifically, we requested that for a period of time, shortfalls in debt service payments accrue without penalty and all extension options be deemed granted notwithstanding the existence of any debt service payment accruals.

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.

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.

As of the date of this filing, we have entered into forbearance and other agreements with varying terms and conditions that conditionally waive or defer payment defaults for our property level debt.

Although we intend to make payments on all of our property level debt in accordance with our respective forbearance agreements, there is no assurance we will be able to maintain compliance with all applicable covenants and requirements.

If we fail to make any required payments or breach any covenants, we may trigger an Event of Default under our respective forbearance agreements.

In such event, we would seek to negotiate new forbearance agreements.

If we were unsuccessful in negotiating such forbearance agreements, the lenders could potentially accelerate payments or foreclose on our assets.

A foreclosure may also result in reputational risks with lenders that could make it more difficult, or more costly, to obtain loans in the future.

Any such Event of Default, acceleration of payments, or foreclosure of our assets could have a material adverse effect on our financial condition, results of operations and cash flows and ability to continue to operate or make distributions to our stockholders in the future.

In addition, an Event of Default could trigger a termination fee under the advisory agreement with Ashford Inc.

An Event of Default could significantly limit our financing alternatives, which could cause us to curtail our

investment activities and/or dispose of assets.

It is also possible that we could become involved in litigation related to matters concerning the defaulted loans, and such litigation could result in significant costs to us.

In addition to losing the applicable properties, a foreclosure may result in recognition of taxable income.

Under the Code, a foreclosure of property securing non-recourse debt would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.

If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure even though we did not receive any cash proceeds.

As a result, we may be required to identify and utilize other sources of cash for distributions to our stockholders.

We may enter into other transactions which could further exacerbate the risks to our financial condition.

We may enter into other transactions that could further exacerbate the risks to our financial condition.

The use of debt to finance future acquisitions could restrict operations, inhibit our ability to grow our business and revenues, and negatively affect our business and financial results.

We intend to incur additional debt in connection with future hotel acquisitions.

We may, in some instances, borrow under our secured revolving credit facility or borrow new funds to acquire hotels.

We may borrow new funds to acquire hotels.

In addition, we may incur mortgage debt by obtaining loans secured by a portfolio of some or all of the hotels that we own or acquire.

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To the extent we cannot meet our future debt service obligations, we will risk losing to foreclosure some or all of our hotels that may be pledged to secure our obligation.

Covenants, “cash trap” provisions or other terms in our mortgage loans and our secured revolving credit facility, as well as any future credit facility, could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.

Some of our loan agreements and our secured revolving credit facility contain financial and other covenants.

Covenants, “cash trap” provisions or other terms in our mortgage loans and our senior convertible notes, as well as any future credit facility, could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.

Some of our loan agreements contain financial and other covenants.

If we violate covenants in any debt agreements, 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.

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There is refinancing risk associated with our debt.

We finance our long-term growth and liquidity needs with, among other things, a revolving line of credit and secured and unsecured debt financings having staggered maturities, and use variable-rate debt or a mix of fixed and variable-rate debt as appropriate based on favorable interest rates, principal amortization and other terms.

In the event that we do not have sufficient funds to repay the debt at the maturity of these loans, we will need to refinance this debt.

We finance our long-term growth and liquidity needs with, among other things, secured and unsecured debt financings having staggered maturities, and use variable-rate debt or a mix of fixed and variable-rate debt as appropriate based on favorable interest rates, principal amortization and other terms.

In the event that we do not have sufficient funds to repay the

debt at the maturity of these loans, we will need to refinance this debt.

If the credit environment is constrained at the time of our debt maturities, we would have a very difficult time refinancing debt.

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We cannot assure you that our hedging strategy and the instruments that we use will not adequately offset the risk of interest rate volatility or other risks or that our hedging transactions will not result in losses that may reduce the overall return on your investment.

We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the use of alternative reference rates.

As of December 31, 2020, we had approximately $1.1 billion of variable interest rate debt as well as interest rate derivatives including caps and floors that are indexed to the London Interbank Offered Rate (“LIBOR”).

In July 2017, the United Kingdom regulator that regulates LIBOR announced its intention to phase out LIBOR rates by the end of 2021.

The Alternative Reference Rates Committee (“ARRC”), a steering committee comprised of large U.S.

financial institutions, has proposed replacing USD-LIBOR with a new index calculated by short-term repurchase agreements, the Secured Overnight Financing Rate (“SOFR”).

At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported before or after 2021 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere.

Such developments and any other legal or regulatory changes in the method by which LIBOR is determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage market participants from continuing to administer or to participate in LIBOR’s determination and, in certain situations, could result in LIBOR no longer being determined and published.

We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the transition away from LIBOR to use of alternative reference rates.

In July 2017, the United Kingdom regulator that regulates London Interbank Offered Rate (“LIBOR”) announced its intention to phase out LIBOR rates by the end of 2021.

On March 5, 2021, the ICE Benchmark Administration Limited, the administrator of LIBOR, and the Financial Conduct Authority announced that all LIBOR rates will either cease to be published by any benchmark administrator, or no longer be representative immediately after December 31, 2021 for all GBP, EUR, CHF and JPY LIBOR rates and one-week and two-month U.S.

dollar LIBOR rates, and immediately after June 30, 2023 for the remaining U.S.

dollar LIBOR rates.

As of January 1, 2022, publication of one-week and two-month U.S.

dollar LIBOR has ceased, and regulated U.S.

financial institutions are no longer permitted to enter into new contracts referencing any LIBOR rates.

The Alternative Reference Rates Committee (“ARRC”), a committee convened by the Federal Reserve Board and the New York Federal Reserve Bank, has proposed replacing U.S.

dollar LIBOR with a new index based on trading in overnight repurchase agreements, the Secured Overnight Financing Rate (“SOFR”).

The ARRC has formally announced and recommended SOFR as an alternative reference rate to LIBOR.

As of December 31, 2021, we had approximately $1.1 billion of variable interest rate debt as well as interest rate derivatives including caps on the majority of our variable rate debt that are indexed to LIBOR.

At this time we are not able to accurately predict when SOFR will become the most prevalent alternative reference rate in the market, or what impact the transition from LIBOR to alternative reference rates may have on our business, results of operations and financial condition.

Additionally, it is difficult to predict whether and to what extent banks will continue to provide submissions to the administrator of rate quotes for the U.S.

dollar LIBOR rates that have not already been discontinued or, if they do, whether such rates will be representative of the underlying market or economic reality before they are schedule to be discontinued on June 30, 2023 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere.

If a published U.S.

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Further, the same costs and risks that may lead to the unavailability of U.S.

dollar LIBOR may make one or more of the alternative methods impossible or impracticable to determine.

Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating results and cash flows.

dollar LIBOR may make one or more of the alternative methods difficult or impracticable to determine.

Our financial instruments may require changes to documentation as well as enhancements and modifications to systems, controls, procedures and models, which could present operational and legal challenges for us and our clients, customers, investors and counterparties.

There can be no assurance that we will be able to modify all existing financial instruments before the discontinuation of LIBOR.

If such financial instruments are not remediated to provide a method for transitioning from LIBOR to an alternative reference rate, the New York state LIBOR legislation and proposed federal legislation related to the LIBOR transition may provide statutory solutions to implement an alternative reference rate and provide legal protection against litigation.

Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating

results and cash flows.

We continue to monitor developments in the LIBOR transition and the proposed federal legislation related to the LIBOR transition to facilitate an orderly transition away from the use of LIBOR.

Risks Related to Conflicts of Interest

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and its subsidiaries (including Ashford LLC, Remington Hotels and Premier), the terms, including fees and other amounts payable, of agreements between us and Ashford Trust, Ashford LLC or Remington Hotels, including our master hotel management agreement and hotel management MEA with Remington Hotels and our master project management agreement and project management MEA with Premier, may not be as favorable to us as the terms under an arm’s-length agreement.

Furthermore, we

may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with Ashford Trust and Ashford LLC.

Furthermore, we may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with Ashford Trust and Ashford LLC.

Ashford LLC may also manage other entities or assets in the future.

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In making the allocation determination, Ashford LLC has no obligation to make any such investment opportunity available to us.

Ashford LLC and Ashford Trust have agreed that any new investment opportunities that satisfy our investment guidelines will be presented to our board of directors;

Ashford LLC and Ashford Trust have agreed that any new investment opportunities that satisfy our

investment guidelines will be presented to our board of directors;

however, our board will have only ten business days to make a determination with respect to such opportunity prior to it being available to Ashford Trust.

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Ashford LLC and its employees, some of whom are our executive officers, face competing demands relating to their time and this may adversely affect our operations.

We rely on Ashford LLC, its subsidiaries and its employees for the day-to-day operation of our business and management of our assets and the provision of project management services.

We rely on Ashford LLC, its subsidiaries and its employees for the day-to-day operation of our business and management of our assets and the provision of design and construction services.

Until its spin-off, Ashford LLC was wholly-owned by Ashford Trust.

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We may not receive the necessary support and assistance we require or would otherwise receive if we were internally managed by persons working exclusively for us.

While we have agreed to provide funds to Ashford Inc.

to fund the formation, registration and ongoing funding needs of Ashford Securities, there can be no assurance Ashford Securities will be successful in helping us raise capital.

We provide funds to Ashford Inc.

to fund the formation, registration and ongoing funding needs of Ashford Securities, which could result in certain conflicts of interest.

There can be no assurance Ashford Securities will continue to be successful in helping us raise capital.

In connection with the formation of Ashford Securities by Ashford Inc.

in September of 2019, we and Ashford Trust have entered into a contribution agreement to provide funds to Ashford Inc.

in September of 2019, we and Ashford Trust entered into a contribution agreement to provide funds to Ashford Inc.

to fund the formation, registration and ongoing funding requirements of Ashford Securities.

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Additionally, the agreements between us and our related parties, including Ashford Securities, may not be arm's-length agreements and may not be as favorable to our investors as would be the case if the parties were operating at arm’s-length.

Notwithstanding our agreement to provide funds to Ashford Inc.

relating to Ashford Securities, there can be no assurance that Ashford Securities will be successful in helping us to raise capital.

There can be no assurance that Ashford Securities will continue to be successful in helping us to raise capital.

Conflicts of interest with Remington Hotels and Premier, each of which is a subsidiary of Ashford Inc., could result in our management acting other than in our stockholders’ best interest.

Remington Hotels, a subsidiary of Ashford Inc., currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa and Hotel Yountville.

Remington Hotels, a subsidiary of Ashford Inc., currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and Mr.

C Beverly Hills Hotel.

We expect Remington Hotels will manage certain of the hotels we acquire in the future.

Premier, also a subsidiary of Ashford Inc., currently provides project management services to us.

We expect Premier will also provide project management services to us in the future.

Premier, also a subsidiary of Ashford Inc., currently provides design and construction services to us.

We expect Premier will also provide design and construction services to us in the future.

Conflicts of interest in general and specifically relating to Remington Hotels and Premier may lead to management decisions that are not in our stockholders’ best interest.

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common stock, which if exercised as of December 31, 2021 would have increased the Bennetts’ ownership interest in Ashford Inc.

to 65.6%, subject to applicable voting limitations.

The 18,758,600 shares of Series D Convertible Preferred Stock owned by Mr.

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We have entered into a hotel management MEA and a master hotel management agreement with Remington Hotels and a project management MEA and master project management agreement with Premier.

To the extent we have the right or control the right to direct such matters, the hotel management MEA requires us to engage Remington Hotels to provide, under the master hotel management agreement, hotel management services for all future properties that we acquire, unless our independent directors either (i) unanimously vote not to hire Remington Hotels, or (ii) based on special circumstances or past performance, by a majority vote, elect not to engage Remington Hotels because they have determined, in their reasonable business judgment, that it would be in our best interest not to engage Remington Hotels or that another manager or developer could perform the duties materially better.

could perform the duties materially better.

The project management MEA and master project management agreement with Premier contains similar provisions.

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In addition, conflicts may arise when the interests of our stockholders and the limited partners of our operating partnership diverge, particularly in circumstances in which there may be an adverse tax consequence to the limited partners.

Tax consequences to holders of common units upon a sale or refinancing of our properties may cause the interests of Ashford Trust or the key employees of Ashford LLC (who are executive officers of Ashford Trust and have ownership interests in Ashford Trust) to differ from our stockholders.

As a result of unrealized built-in gain attributable to contributed property at the time of contribution, some holders of common units, including Ashford Trust, may suffer different and more adverse tax consequences than holders of our common stock upon the sale or refinancing of the properties owned by our operating partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event.

As a result of unrealized built-in gain attributable to contributed property at the time of contribution, some holders of common units may suffer different and more adverse tax consequences than holders of our common stock upon the sale or refinancing of the properties owned by our operating partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event.

As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all.

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In addition, our hotels are subject to various operating risks common to the hotel industry, many of which are beyond our control, and are discussed in more detail below.

The outbreak of COVID-19 has and will continue to significantly reduce our occupancy rates and RevPAR.

Our business has been and will continue to be materially adversely affected by the impact of, and the public concern about, a pandemic disease.

In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has resulted in increased travel restrictions and extended shutdown of certain businesses in every state in the United States, Since late February 2020, we have experienced a significant decline in occupancy and RevPAR and we expect the significant occupancy and RevPAR declines associated with the COVID-19 to continue as we are experiencing significant reservation cancellations as well as a significant reduction in new reservations.

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.

The outbreak of COVID-19 has and will continue to reduce our occupancy rates and RevPAR.

Despite recent progress in the administration of vaccines, both the outbreak of recent variants, including Delta and Omicron, and the related containment and mitigation measures that have been put into place across the globe, have had and are likely to continue to have a serious adverse impact on the global economy and our business, the severity and duration of which are uncertain.

Since late February 2020, we have experienced a significant decline in occupancy and RevPAR and we expect the occupancy and RevPAR reduction associated with COVID-19 to continue.

The continued outbreak of the virus in the U.S.

has and will continue to further reduce travel and demand at our hotels.

The prolonged occurrence of the virus has resulted in health or other government authorities imposing widespread restrictions on travel or other market impacts.

The hotel industry and our portfolio have and we expect will continue to experience the postponement or cancellation of a significant number of

business conferences and similar events.

At this time those restrictions are very fluid and evolving.

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Given that the type, degree and length of such restrictions are not known at this time, we cannot predict the overall impact of such restrictions on us or the overall economic environment.

Even after the restrictions are lifted, the propensity of people to travel and for businesses to hold conferences will likely remain below historical levels for an additional period of time that is difficult to predict.

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.

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

We may also face increased risk of litigation if we have guests or employees who become ill due to COVID-19.

As such, the full impact these restrictions may have on our financial position, operating results and liquidity cannot be reasonably estimated at this time, but the impact will be material.

Additionally, the public perception of a risk of a pandemic or

media coverage of these diseases, or public perception of health risks linked to perceived regional food and beverage safety has materially adversely affected us by reducing demand for our hotels.

The length of time required for an effective vaccine or therapy to become widely available in uncertain.

Additionally, the public perception of a risk of a pandemic or media coverage of these diseases, or public perception of health risks linked to perceived regional food and beverage safety has materially adversely affected us by reducing demand for our hotels.

These events have resulted in a sustained, significant drop in demand for our hotels and could have a material adverse effect on us.

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In addition, the disruption of the existing travel plans of a significant number of travelers upon the occurrence of certain events, such as severe weather conditions, actual or threatened terrorist activity, war or travel-related health events, could result in significant additional costs and decrease our revenues, in each case, leading to constrained liquidity.

Also, see the risk factor “The outbreak of COVID-19 has and will continue to significantly reduce our occupancy rates and RevPAR.”

Also, see the risk factor “The outbreak of COVID-19 has and will continue to reduce our occupancy rates and RevPAR.”

We may have to make significant capital expenditures to maintain our hotel properties, and any development activities we undertake may be more costly than we anticipate.

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• construction cost overruns and delays;

• the disruption of operations and displacement of revenue at operating hotels, including revenue lost while rooms, restaurants or meeting space under renovation are out of service;

• the disruption of operations at, displacement of revenue at, and damage to operating hotels, including revenue lost while rooms, restaurants or meeting space under renovation are out of service;

• increases in operating costs at our hotels, to the extent they rely on portions of development sites for hotel operations;

• the cost of funding renovations or developments and inability to obtain financing on attractive terms;

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• disputes with franchisors or hotel managers regarding compliance with relevant franchise agreements or management agreements:

• development related liabilities, such as claims for design/construction defects.

If we have insufficient cash flow from operations to fund needed capital expenditures, then we will need to borrow, sell assets or sell additional equity securities to fund future capital improvements.

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The increasing use of Internet travel intermediaries by consumers may adversely affect our profitability.

Some of our hotel rooms are booked through Internet travel intermediaries, including, but not limited to, Travelocity.com, Expedia.com and Priceline.com.

Some of our hotel rooms are booked through Internet travel intermediaries, including, but not limited to, Tripadvisor.com, Travelocity.com, Expedia.com and Priceline.com.

As Internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from our management companies.

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In addition, our hotel properties may be subject to environmental liabilities.

operator of real property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property.

An owner or operator of real property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property.

We may face liability regardless of:

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In the event of a substantial loss, our insurance coverage may not cover the full current market value or replacement cost of our lost investment.

Inflation, changes in building codes and ordinances, environmental considerations, and other factors might cause insurance

proceeds to be insufficient to fully replace or renovate a hotel after it has been damaged or destroyed.

Inflation, changes in building codes and ordinances, environmental considerations, and other factors might cause insurance proceeds to be insufficient to fully replace or renovate a hotel after it has been damaged or destroyed.

Accordingly, it is possible that:

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Because provisions contained in Maryland law and our charter may have an anti-takeover effect, investors may be prevented from receiving a “control premium” for their shares.

Provisions contained in our charter and Maryland general corporation law may have effects that delay, defer, or prevent a takeover attempt, which may prevent stockholders from receiving a “control premium” for their shares.

Provisions contained in our charter and the Maryland General Corporation Law (the “MGCL”) may have effects that delay, defer, or prevent a takeover attempt, which may prevent stockholders from receiving a “control premium” for their shares.

For example, these provisions may defer or prevent tender offers for our common stock or purchases of large blocks of our common stock, thereby limiting the opportunities for our stockholders to receive a premium for their common stock over then-prevailing market prices.

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Certain provisions of Maryland law could inhibit changes in control.

Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of inhibiting a third party from making a proposal to acquire us under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of our common stock or a “control premium” for their shares or inhibit a transaction that might otherwise be viewed as being in the best interest of our stockholders.

Certain provisions of the MGCL may have the effect of inhibiting a third party from making a proposal to acquire us under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of our common stock or a “control premium” for their shares or inhibit a transaction that might otherwise be viewed as being in the best interest of our stockholders.

These provisions include:

interested stockholder, and thereafter impose special stockholder voting requirements on these business combinations, unless certain fair price requirements set forth in the MGCL are satisfied;

• “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose special stockholder voting requirements on these business combinations, unless certain fair price requirements set forth in the MGCL are satisfied;

• “control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

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Our charter authorizes the issuance of up to 250,000,000 shares of common stock and 80,000,000 shares of preferred stock.

As of March 3, 2021, we had 40,453,693 shares of our common stock issued and outstanding, 5,031,473 shares of our Series B Cumulative Convertible Preferred Stock and 1,600,000 shares of our Series D Cumulative Preferred Stock.

We also have also authorized 10,000,000 shares of our Series C Preferred Stock, 28,000,000 shares of our Series E Preferred Stock and 28,000,000 shares of our Series M Preferred Stock, and no shares of Series C Preferred Stock, Series E Preferred Stock and Series M Preferred Stock are issued.

As of March 8, 2022, we had 65,348,848 shares of our common stock issued and outstanding, 3,078,017 shares of our Series B Cumulative Convertible Preferred Stock, 1,600,000 shares of our Series D Cumulative Preferred Stock, 2,912,159 shares of our Series E Redeemable Preferred Stock and 36,804 shares of our Series M Redeemable Preferred Stock.

Our charter allows us to create new series of preferred stock at any time.

Accordingly, we may issue up to an additional 184,651,152 shares of common stock and 72,373,020 shares of preferred stock.

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We believe that our organization and current and proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 2013.

However, we may not qualify or remain qualified as a REIT or we may be required to rely on a REIT “savings clause.” If we were to rely on a REIT “savings clause,” we would have to pay a penalty tax, which could be material.

However, we may not qualify or remain

qualified as a REIT or we may be required to rely on a REIT “savings clause.” If we were to rely on a REIT “savings clause,” we would have to pay a penalty tax, which could be material.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:

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Our TRSs are subject to federal, state and local income tax on their taxable income, which consists of the revenues from the hotel properties leased by our TRS lessees, or, in the case of The Ritz-Carlton St.

Thomas hotel, owned by our TRS, net of the operating expenses for such hotel properties and, in the case of hotel properties leased by our TRS lessees, rent payments to us.

Thomas hotel, owned by our TRS, net of

the operating expenses for such hotel properties and, in the case of hotel properties leased by our TRS lessees, rent payments to us.

Accordingly, although our ownership of our TRS allows us to participate in the operating income from our hotel properties in addition to receiving rent, the net operating income is fully subject to income tax.

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If our hotel managers, including Ashford Hospitality Services, LLC (“AHS”) and its subsidiaries (including Remington Hotels), do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.

Each of the hotel management companies that enters into a management contract with our TRS lessees must qualify as an “eligible independent contractor” under the REIT rules in order for the rent paid to us by our TRS lessees to be qualifying income for our REIT income test requirements.

outstanding shares and the ownership interests of the manager, taking into account only owners of more than 5% of our shares and, with respect to ownership interests in such managers that are publicly-traded, only holders of more than 5% of such ownership interests.

Each of the hotel management companies that enters into a management contract with our TRS lessees must qualify as an “eligible independent contractor”

under the REIT rules in order for the rent paid to us by our TRS lessees to be qualifying income for our REIT income test requirements.

Among other requirements, in order to qualify as an eligible independent contractor a manager must not own more than 35% of our outstanding shares (by value) and no person or group of persons can own more than 35% of our outstanding shares and the ownership interests of the manager, taking into account only owners of more than 5% of our shares and, with respect to ownership interests in such managers that are publicly-traded, only holders of more than 5% of such ownership interests.

Complex ownership attribution rules apply for purposes of these 35% thresholds.

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To the extent that distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such stock.

We may pay taxable dividends in our common stock and cash, in which case stockholders may sell our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.

We may distribute taxable dividends that are payable in cash and common stock at the election of each stockholder subject to certain limitations, including that the cash portion be at least 20% of the total distribution.

We may in the future choose to pay taxable dividends in our common stock instead of cash, in which case stockholders may sell our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.

while not clear, such 10% limitation could be extended in the future).

If we make a taxable dividend payable in cash and common stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits, as determined for U.S.

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Instead, each of its partners, including us, is allocated, and may be required to pay tax with respect to, its share of our operating partnership’s income.

IRS could challenge the status of our operating partnership or any other subsidiary partnership in which we own an interest as a partnership for U.S.

The IRS could challenge the status of our operating partnership or any other subsidiary partnership in which we own an interest as a partnership for U.S.

federal income tax purposes, and a court could sustain such a challenge.

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Sales of substantial amounts of shares of our common stock in the public market, or upon exchange of the common units, or speculation that such sales might occur, could adversely affect the liquidity of the market for our common stock or the prevailing market price of our common stock.

In addition, the exchange of common units for common stock, the exercise of any stock options or the vesting of any restricted stock granted under the 2013 Equity Incentive Plan and the Advisor Equity Incentive Plan, the issuance of our common stock or common units in connection with property, portfolio or business acquisitions and other issuances of our common stock or common units could adversely affect the market price of our common stock.

In addition, the exchange of common units for common stock, the exercise of any stock options or the vesting of any restricted stock granted under the 2013 Equity Incentive Plan, the issuance of our common stock or common units in connection with property, portfolio or business acquisitions and other issuances of our common stock or common units could adversely affect the market price of our common stock.

Our directors and executive officers own common units in our Company.

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Our failure to meet the market’s expectations with regard to future earnings and cash distributions likely would adversely affect the market price of our common stock.

See the risk factor “The outbreak of COVID-19 has and will continue to significantly reduce our occupancy rates and RevPAR.”

See the risk factor “The outbreak of COVID-19 has and will continue to reduce our occupancy rates and RevPAR.”

Our stock repurchase program could increase the volatility of the price of our common stock.

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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-K

Item 1A. Risk Factors