What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2021-11-05 · 183 added, 429 removed, 368 unchanged (62% of the section changed)

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“Premier” refers to Premier Project Management LLC, a Maryland limited liability company and a subsidiary of Ashford LLC.

“Remington Lodging” refers to Remington Lodging & Hospitality, LLC, a Delaware limited liability company and a hotel management company that was owned by Mr.

Bennett, chairman of our board of directors, and his father, Mr.

Archie Bennett, Jr., chairman emeritus of Ashford Trust before its acquisition by Ashford Inc.

on November 6, 2019.

“Remington Hotels” refers to the same entity after the acquisition was completed resulting in Remington Lodging & Hospitality, LLC becoming a subsidiary of Ashford Inc.

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Additionally, statements regarding the following subjects are forward-looking by their nature:

• the impact of COVID-19 and numerous governmental travel restrictions and other orders on our business, including one or more possible recurrences of COVID-19 case surges causing state and local governments to reinstate travel restrictions;

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

• 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;

• the impact of numerous governmental travel restrictions and other orders related to COVID-19 on our business including one or more possible recurrences of COVID-19 case surges causing state and local governments to reinstate travel restrictions;

• our business and investment strategy;

• our projected operating results and dividend rates;

• our ability to obtain future financing arrangements or restructure existing indebtedness;

• anticipated or expected purchases or sales of assets;

• our projected operating results;

• completion of any pending transactions;

• our ability to secure additional financing to enable us to operate our business during the pendency of COVID-related business weakness, which has materially impacted our operating cash flows and cash balances;

• our understanding of our competition;

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• projected capital expenditures;

• anticipated acquisitions or dispositions;

• the impact of technology on our operations and business.

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

• the factors discussed in our Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2021 (the “2020 10-K”), including those set forth under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties;” and other filings under the Exchange Act;

causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or local governments;

• 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;

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

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

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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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We operate in the direct hotel investment segment of the hotel lodging industry.

As of September 30, 2021, we owned interests in 14 hotel properties in six states, the District of Columbia and St.

As of March 31, 2022, we owned interests in 15 hotel properties in six states, the District of Columbia, Puerto Rico and St.

Virgin Islands with 3,971 total rooms, or 3,736 net rooms, excluding those attributable to our joint venture partner.

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instead we employ hotel management companies to operate them for us under management contracts.

As of September 30, 2021, Remington Hotels, a subsidiary of Ashford Inc., managed four of our 14 hotel properties.

As of March 31, 2022, Remington Hotels, a subsidiary of Ashford Inc., managed four of our 15 hotel properties.

Third-party management companies managed the remaining hotel properties.

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and, together with Mr.

Archie Bennett, Jr., as of September 30, 2021, owned approximately 609,413 shares of Ashford Inc.

Archie Bennett, Jr., as of March 31, 2022, owned approximately 610,246 shares of Ashford Inc.

common stock, which represented an approximate 19.6% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc.

Series D Convertible Preferred Stock, which was exercisable (at an exercise price of $117.50 per share) into an additional approximate 3,991,191 shares of Ashford Inc.

common stock, which if exercised as of September 30, 2021 would have increased the Bennetts’ ownership interest in Ashford Inc.

common stock, which if exercised as of March 31, 2022 would have increased the Bennetts’ ownership interest in Ashford Inc.

to 64.8% subject to applicable voting limitations;

provided that prior to August 8, 2023, the voting power of the holders of the Ashford Inc.

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include 360,000 shares owned by trusts.

As of September 30, 2021, Mr.

As of March 31, 2022, Mr.

Bennett, chairman of our board of directors and his father, Mr.

Archie Bennett, Jr., together owned approximately 4,557,361 shares of our common stock (including common units, long-term incentive plan (“LTIP”) units and performance LTIP units), which represented an approximate 5.7% ownership in the Company.

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 throughout the United States.

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

Beginning in late February 2020, we experienced a significant decline in occupancy and RevPAR associated with COVID-19 as we experienced 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.

As of September 30, 2021, the Company maintained unrestricted cash of $195.5 million and restricted cash of $44.8 million.

For the nine months ended September 30, 2021, cash flows provided by operating activities was approximately $55.1 million.

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

At the end of the quarter, there was also $20.4 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.

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.

Recent Developments

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 also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.

As of November 3, 2021, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received proceeds of approximately $24.0 million.

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

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

C Beverly Hills Hotel and five luxury residences adjacent to the hotel.

The total consideration consisted of $10.0 million of cash, 2.5 million Braemar OP common units with a fair value of approximately $13.2 million and 500,000 warrants for the purchase of Braemar common stock with a $6.00 strike price and a fair value of approximately $1.5 million.

On February 2, 2022, the Company refinanced its mortgage loan secured by the Park Hyatt Beaver Creek Resort & Spa, which had a final maturity date in April 2022.

The new, non-recourse mortgage loan totals $70.5 million and has a two-year initial term with three one-year extension options, subject to the satisfaction of certain conditions.

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

In connection with the refinancing, the Company paid Lismore a fee of approximately $637,000.

On March 10, 2022, the Company entered into a Limited Waiver Under Advisory Agreement (the “Limited Waiver”) with Braemar OP, Braemar TRS and its advisor.

As previously disclosed, the advisory agreement (i) allocates responsibility for certain employee costs between the Company and its advisor and (ii) permits the Company’s board of directors to issue annual equity awards in the Company or Braemar OP to employees and other representatives of its advisor based on achievement by the Company of certain financial or other objectives or otherwise as the Company’s board of directors sees fit.

Pursuant to the Limited Waiver, the Company, Braemar OP, Braemar TRS and the Company’s advisor waived the operation of any provision in the advisory agreement that would otherwise limit its ability, in its discretion and at the Company’s cost and expense, to award during the first and second fiscal quarters of calendar year 2022 cash incentive compensation to employees and other representatives of its advisor.

On March 11, 2022, the Company acquired a 100% interest in the 96-room Dorado Beach, a Ritz-Carlton Reserve in Dorado, Puerto Rico.

The total consideration consisted of $104 million of cash, 6.0 million shares of common stock with a fair value of approximately $35.0 million.

Additionally, the Company assumed a $54.0 million mortgage loan with a fair value of approximately $58.6 million.

Upon closing, the Company repaid $20.0 million of the assumed mortgage loan.

On September 23, 2021, the Company finalized an extension of its mortgage loans for the Bardessono Hotel and Spa with a final maturity in August 2022 and the Hotel Yountville with a final maturity in May 2022.

Each of the loans was extended for one year beyond its original maturity on the same terms as the original loan.

The Company also participates in a rental management program attributable to residences in the program.

At acquisition, there were ten residences in the regular rental program and four in the flexible rental program.

On March 14, 2022, the Company filed a resale registration statement on Form S-3, which was declared effective by the SEC on April 1, 2022, to register for resale the 6.0 million shares of common stock.

On April 15, 2022, Ashford Inc.

and Ashford Services, agreed with Jeremy Welter, the Chief Operating Officer of Ashford Inc., that, effective on the Resignation Date, Mr.

Welter would terminate employment with and service to Ashford Inc., Ashford Services and their affiliates.

Welter is also the Chief Operating Officer of the Company and Braemar and accordingly his service as Chief Operating Officer of each of the Company and Braemar will also end effective as of the Resignation Date.

Key Indicators of Operating Performance

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the three months ended September 30, 2021 and 2020 (in thousands except percentages):

Three Months Ended September 30, Favorable (Unfavorable)

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 (in thousands except percentages):

Three Months Ended March 31, Favorable (Unfavorable)

2022 2021 $ Change % Change

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Other 19,981 12,896 7,085 54.9

Total revenue 116,177 44,754 71,423 159.6

Total hotel revenue 161,880 83,848 78,032 93.1

Hotel operating expenses:

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Advisory services fee 7,322 4,795 (2,527) (52.7)

Transaction costs 275 — (275)

Corporate general and administrative 2,495 1,600 (895) (55.9)

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Interest income 25 9 16 177.8

Other income (expense) — (3,604) 3,604 100.0

Interest expense and amortization of loan costs (8,364) (8,859) 495 5.6

Interest expense and amortization of discounts and loan costs (8,522) (6,756) (1,766) (26.1)

Write-off of loan costs and exit fees (76) (351) 275 78.3

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Net income (loss) attributable to the Company $ 14,663 $ (8,708) $ 23,371 268.4 %

All hotel properties owned for the three months ended September 30, 2021 and 2020 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended September 30, 2021 and 2020.

All hotel properties owned for the three months ended March 31, 2022 and 2021 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended March 31, 2022 and 2021.

The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties.

The following acquisitions and dispositions affect reporting comparability related to our condensed consolidated financial statements:

Hotel Properties Location Acquisition/Disposition Acquisition/Disposition Date

C Beverly Hills Hotel Los Angeles, CA Acquisition August 5, 2021

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

Three Months Ended September 30,

The following acquisitions affect reporting comparability related to our condensed consolidated financial statements:

Hotel Properties Location Type Date

C Beverly Hills Hotel Los Angeles, California Acquisition August 5, 2021

The Ritz-Carlton Reserve Dorado Beach Dorado, Puerto Rico Acquisition March 11, 2022

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

Three Months Ended March 31,

Occupancy 54.95 % 37.01 %

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Total hotel revenue (in thousands) $ 161,880 $ 83,848

The following table illustrates the key performance indicators of the 13 hotel properties that were included for the full three months ended September 30, 2021 and 2020:

Three Months Ended September 30,

The following table illustrates the key performance indicators of the 13 hotel properties that were included for the full three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Occupancy 54.39 % 37.01 %

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Net Income (Loss) Attributable to the Company.

Net loss attributable to the Company decreased $11.7 million, from $18.7 million for the three months ended September 30, 2020 (the “2020 quarter”) to $6.9 million for the three months ended September 30, 2021 (the “2021 quarter”), as a result of the factors discussed below.

Net income (loss) attributable to the Company changed by $23.4 million, from a net loss of $8.7 million for the three months ended March 31, 2021 (the “2021 quarter”), to net income of $14.7 million for the three months ended March 31, 2022 (the “2022 quarter”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue increased $50.9 million, or 93.6%, to $105.2 million during the 2022 quarter compared to the 2021 quarter.

During the 2021 quarter, we experienced a 3,476 basis point increase in occupancy and a 17.5% increase in room rates.

The increase in rooms revenue is primarily due to the hotel properties recovering from the COVID-19 pandemic as well as an increase of $1.5 million associated with the acquisition of the Mr.

C Beverly Hills Hotel on August 5, 2021.

Fluctuations in rooms revenue between the 2021 quarter and the 2020 quarter is a result of the changes in occupancy and ADR between the 2021 quarter and the 2020 quarter as reflected in the table below (dollars in thousands):

During the 2022 quarter, we experienced a 1,794 basis point increase in occupancy and a 24.4% increase in room rates compared to the 2021 quarter.

The increase in rooms revenue is due to the hotel properties recovering from the COVID-19 pandemic as well as an increase of $3.3 million associated with the acquisition of the Mr.

C Beverly Hills Hotel on August 5, 2021 and $5.5 million with the acquisition of The Ritz-Carlton Reserve Dorado Beach on March 11, 2022.

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

Hotel Property Favorable (Unfavorable)

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Capital Hilton $ 1,849 1,060 38.3 %

$ 2,145 2,698 21.7 %

Marriott Seattle Waterfront 1,690 2,508 16.0 %

The Notary Hotel 1,834 1,894 26.2 %

The Clancy (2)

5,185 7,469 n/a

3,591 2,998 78.8 %

Sofitel Chicago Magnificent Mile 1,340 2,041 4.2 %

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C Beverly Hills Hotel $ 3,285 n/a n/a

_______________

(1) The hotel was closed from April 2020 through mid-August 2020.

(2) The hotel was being renovated through September 30, 2020.

The Ritz-Carlton Reserve Dorado Beach $ 5,475 n/a n/a

Total $ 8,760

Food and Beverage Revenue .

Food and beverage revenue increased $20.1 million, or 120.7%, to $36.7 million during the 2022 quarter compared to the 2021 quarter.

This increase is attributable to an aggregate increase at all comparable hotel properties of $15.4 million as they are recovering from the COVID-19 pandemic, as well as an increase of $553,000 resulting from the acquisition of the Mr.

C Beverly Hills Hotel on August 5, 2021.

This increase is primarily driven by the recovery from the COVID-19 pandemic.

We experienced an aggregate increase in food and beverage revenue of $17.9 million at 13 comparable hotel properties as well as increases of $1.1 million at the Mr.

C Beverly Hills Hotel and $1.1 million at The Ritz-Carlton Reserve Dorado Beach.

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals and business interruption revenue, increased $6.0 million, or 74.4%, to $14.1 million during the 2021 quarter compared to the 2020 quarter.

The increase is attributable to an aggregate increase in other hotel revenue of $5.8 million at 13 comparable hotel properties and an increase of $186,000 at the Mr.

C Beverly Hills Hotel.

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $7.1 million, or 54.9%, to $20.0 million during the 2022 quarter compared to the 2021 quarter.

The increase is attributable to higher other hotel revenue of $5.9 million at 13 comparable hotel properties and an increase of $279,000 at the Mr.

C Beverly Hills Hotel and $888,000 at The Ritz-Carlton Reserve Dorado Beach.

Rooms Expense .

Rooms expense increased $9.2 million, or 83.2%, to $20.2 million in the 2022 quarter compared to the 2021 quarter.

This increase is primarily attributable to an aggregate increase of $8.8 million at 12 comparable hotel properties as they are recovering from the COVID-19 pandemic and an increase of $410,000 at the Mr.

C Beverly Hills Hotel, partially offset by a decrease of $113,000 at the Capital Hilton.

The increase is attributable to an aggregate increase in rooms expense of $7.5 million at 13 comparable hotel properties due to the hotel properties recovering from the COVID-19 pandemic and increases of $889,000 at the Mr.

C Beverly Hills Hotel and $797,000 at The Ritz-Carlton Reserve Dorado Beach.

Food and Beverage Expense .

Food and beverage expense increased $14.1 million, or 100.9%, to $28.0 million during the 2022 quarter compared to the 2021 quarter.

This increase is attributable to an aggregate increase of $11.8 million at all comparable hotel properties and an increase of $455,000 at the Mr.

C Beverly Hills Hotel.

The increase is attributable to an aggregate increase of $12.4 million at 13 comparable hotel properties and increases of $1.0 million at the Mr.

C Beverly Hills Hotel and $689,000 at The Ritz-Carlton Reserve Dorado Beach.

Other Operating Expenses .

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Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees.

We experienced an increase of $2.2 million in direct expenses and $13.4 million in indirect expenses and incentive management fees in the 2021 quarter as compared to the 2020 quarter as the hotel properties are recovering from the COVID-19 pandemic.

We experienced an increase of $1.9 million in direct expenses and $15.8 million in indirect expenses and incentive management fees in the 2022 quarter compared to the 2021 quarter.

Direct expenses were 4.2% of total hotel revenue in the 2022 quarter and 5.9% in the 2021 quarter.

The increase in direct expenses is primarily attributable to higher occupancy levels at all of our comparable hotel properties as they are recovering from the COVID-19 pandemic and an increase of approximately $13,000 at the Mr.

C Beverly Hills Hotel.

The increase in indirect expenses comprises increases in:

(i) general and administrative costs of $4.6 million comprising an increase of $4.3 million at our 13 comparable hotel properties and $294,000 at the Mr.

C Beverly Hills Hotel;

(ii) marketing

costs of $3.8 million comprising an increase of $3.6 million at our 13 comparable hotel properties and $181,000 at the Mr.

C Beverly Hills Hotel;

(iii) repairs and maintenance of $1.8 million, comprising an increase of $1.7 million at our 13 comparable hotel properties and $79,000 at the Mr.

C Beverly Hills Hotel;

(iv) lease expense of $825,000 comprising an increase of $820,000 at our 13 comparable hotel properties and $5,000 at the Mr.

C Beverly Hills Hotel;

(v) energy costs of $1.2 million comprising an increase of $1.0 million at our 13 comparable hotel properties and $153,000 at the Mr.

C Beverly Hills Hotel;

and (vi) incentive management fees of $1.2 million comprising an increase of $1.2 million at our 13 comparable hotel properties and $22,000 at the Mr.

C Beverly Hills Hotel.

The increase in direct expenses is associated with higher direct expenses at our comparable hotel properties as they are recovering from the COVID-19 pandemic, as well as an increase of $36,000 at the Mr.

C Beverly Hills Hotel and $419,000 at The Ritz-Carlton Reserve Dorado Beach.

The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $5.1 million comprising an increase of $4.0 million at our 13 comparable hotel properties and $1.1 million at the two acquired hotel properties;

(ii) marketing costs of $3.8 million comprising an increase of $3.3 million at our 13 comparable hotel properties and $551,000 at the two acquired hotel properties;

(iii) repairs and maintenance of $1.6 million comprising an increase of $1.2 million at our 13 comparable hotel properties and $405,000 at the two acquired hotel properties;

(iv) lease expense of $251,000 comprising an increase of $237,000 at our 13 comparable hotel properties and $14,000 at the two acquired hotel properties;

(v) energy costs of $1.2 million comprised of an increase of $896,000 at our 13 comparable hotel properties and $329,000 at the two acquired hotel properties;

and (vi) incentive management fees of $3.8 million comprising an increase of $3.6 million at our 13 comparable hotel properties and $121,000 at the two acquired hotel properties.

Management Fees .

Base management fees increased $2.3 million, or 172.1%, to $3.6 million in the 2021 quarter compared to the 2020 quarter at all of our comparable hotel properties as a result of the recovery from the COVID-19 pandemic and an increase of $67,000 at the Mr.

C Beverly Hills Hotel.

Base management fees increased $1.6 million, or 63.8%, to $4.1 million in the 2022 quarter compared to the 2021 quarter.

Management fees increased approximately $2.0 million at 12 of our comparable hotel properties, $136,000 at the Mr.

C Beverly Hills Hotel and $243,000 at The Ritz-Carlton Reserve Dorado Beach.

These increases were partially offset by a decrease of $807,000 at the Sofitel Chicago Magnificent Mile primarily as a result of a legal settlement with Accor.

“Legal Proceedings.”

Property Taxes, Insurance and Other .

Property taxes, insurance and other increased $1.3 million, or 18.4%, to $8.6 million in the 2022 quarter compared to the 2021 quarter.

The increase comprised an aggregate increase of approximately $5.9 million at six hotel properties.

Approximately $5.3 million of the increase is primarily attributable to higher current year assessments at two hotel properties.

The increase also includes an increase of $209,000 at the Mr.

C Beverly Hills Hotel, partially offset by an aggregate decrease of approximately $314,000 at seven hotel properties.

The increase is comprised of an aggregate increase of approximately $1.5 million at six hotel properties as well as increases of $329,000 at the Mr.

C Beverly Hills Hotel and $240,000 at The Ritz-Carlton Reserve Dorado Beach as a result of their acquisitions.

These increases were partially offset by an aggregate decrease of approximately $941,000 at seven hotel properties.

Depreciation and Amortization .

Depreciation and amortization decreased $223,000, or 1.2%, to $18.3 million in the 2021 quarter compared to the 2020 quarter.

The decrease is comprised of an aggregate decrease of approximately $959,000 at eight comparable hotel properties, partially offset by an aggregate increase of $363,000 at The Clancy, Hotel Yountville, The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota and The Ritz-Carlton Lake Tahoe as well as an increase of $373,000 at the Mr.

C Beverly Hills Hotel.

Depreciation and amortization increased $88,000, or 0.5%, to $18.4 million for the 2022 quarter compared to the 2021 quarter.

The increase is comprised of an increase of $609,000 at the Mr.

C Beverly Hills Hotel and $351,000 at Ritz-Carlton Reserve Dorado Beach as a result of their acquisitions as well as an aggregate increase of $442,000 at the Park Hyatt Beaver Creek Resort & Spa, Marriott Seattle Waterfront, Hotel Yountville, The Ritz-Carlton St.

Thomas and The Ritz-Carlton Lake Tahoe.

These increases were partially offset by an aggregate decrease of $1.3 million at eight comparable hotel properties primarily due to fully depreciated assets.

Advisory Services Fee.

Advisory services fee increased $234,000, or 5.1%, to $4.8 million in the 2021 quarter compared to the 2020 quarter due to increases in the base advisory fee of $372,000, reimbursable expenses of $290,000 and equity-based compensation of $1.2 million, partially offset by a decrease in incentive fee of $1.6 million.

Advisory services fee increased $2.5 million, or 52.7%, to $7.3 million in the 2022 quarter compared to the 2021 quarter due to increases in the base advisory fee of $394,000, reimbursable expenses of $604,000, an incentive fee of $606,000 and an increase in equity-based compensation of $923,000.

In the 2022 quarter, we recorded an advisory services fee of $7.3 million, which included a base advisory fee of $2.9 million, reimbursable expenses of $1.1 million, $2.3 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

and an incentive fee of $977,000.

In the 2021 quarter, we recorded an advisory services fee of $4.8 million, which included a base advisory fee of $2.5 million, reimbursable expenses of $492,000, $1.4 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

and a credit to incentive fee of $1.6 million.

In the 2020 quarter, we recorded an advisory services fee of $4.6 million, which included a base advisory fee of $2.4 million, reimbursable expenses of $404,000 and $1.8 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

Transaction Costs.

In the 2021 quarter, we recognized transactions costs of $275,000 associated with the acquisition of the Mr.

C Beverly Hills Hotel.

There were no transaction costs in the 2020 quarter.

and an incentive fee of $371,000.

Corporate General and Administrative .

Corporate general and administrative expense was $2.5 million in the 2022 quarter and $1.6 million in the 2021 quarter.

The increase in corporate general and administrative expense is due to higher professional fees of $226,000, higher public company costs of $225,000 and an increase of $414,000 related to our share of the reimbursed operating expenses of Ashford Securities, partially offset by lower miscellaneous expenses of $176,000.

Gain (Loss) on Insurance Settlement and Disposition of Assets.

In the 2020 quarter, we recognized a gain of $10.1 million as a result of finalizing the insurance settlement from Hurricane Irma.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2021 quarter and 2020 quarter, we recorded equity in loss of unconsolidated entity of $68,000 and $58,000, respectively, related to our investment in OpenKey.

Interest Income .

Interest income increased $1,000, or 8.3%, to $13,000 for the 2021 quarter.

Other Income (Expense) .

Other expense was $3.6 million in 2020 quarter compared to $0 in the 2021 quarter.

In the 2020 quarter, we recorded a realized loss of $3.5 million on interest rate floors and expense of $64,000 related to CMBX premiums and interest paid on collateral.

Interest Expense and Amortization of Loan Costs .

Interest expense and amortization of loan costs decreased $495,000, or 5.6%, to $8.4 million in the 2021 quarter compared to the 2020 quarter.

The decrease is primarily due to lower interest expense from a lower average LIBOR rate, a credit to interest expense related to the amortization of default interest and late charges recorded on loans that were previously in default and the repayment of our secured term loan.

These decreases were partially offset by higher interest expense associated with our Convertible Senior Notes and the mortgage loan associated with the Mr.

Beverly Hills Hotel acquisition.

The average LIBOR rates in the 2021 quarter and the 2020 quarter were 0.09% and 0.16%, respectively.

Write-off of Loan Costs and Exit Fees.

Write-off of loan costs and exit fees was $432,000 in the 2021 quarter, primarily associated with the $419,000 write-off of loan costs upon the $20 million pay-down of the mortgage loan assumed with the Mr.

C Beverly Hills Hotel acquisition.

Write-off of loan costs and exit fees was $1.3 million in the 2020 quarter, resulting from amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments.

Third-party fees incurred in conjunction with these amendments, totaling $1.3 million, were expensed in accordance with applicable accounting guidance.

Unrealized Gain (Loss) on Derivatives .

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

Unrealized gain on derivatives of $3.6 million in the 2020 quarter consisted of a $3.5 million unrealized gain on interest rate floors associated with the recognition of realized losses from the expiration of interest rate floors and a $51,000 unrealized gain on CMBX credit default swaps, partially offset by a $30,000 unrealized loss on interest rate caps.

Income Tax (Expense) Benefit .

Income tax (expense) benefit changed $2.1 million, from an income tax benefit of $1.5 million in the 2020 quarter to income tax expense of $560,000 in the 2021 quarter.

This change was primarily due to an increase in the profitability of our TRS entities in the 2021 quarter compared to the 2020 quarter.

(Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities.

Our noncontrolling interest partner in consolidated entities was allocated a loss of $450,000 and $2.0 million in the 2021 quarter and the 2020 quarter, respectively.

At both September 30, 2021 and 2020, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership.

Noncontrolling interests in operating partnership were allocated a net loss of $823,000 and $2.4 million in the 2021 quarter and the 2020 quarter, respectively.

Redeemable noncontrolling interests in Braemar OP represented ownership interests of 8.35% and 10.08% as of September 30, 2021 and 2020, respectively.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020 (in thousands except percentages):

Nine Months Ended September 30, Favorable (Unfavorable)

2021 2020 $ Change % Change

Rooms $ 195,720 $ 105,119 $ 90,601 86.2 %

Food and beverage 60,976 39,417 21,559 54.7

Other 40,439 30,633 9,806 32.0

Total hotel revenue 297,135 175,169 121,966 69.6

Hotel operating expenses:

Rooms 41,569 29,300 (12,269) (41.9)

Food and beverage 50,526 35,544 (14,982) (42.2)

Other expenses 98,143 75,585 (22,558) (29.8)

Management fees 9,079 5,664 (3,415) (60.3)

Total hotel operating expenses 199,317 146,093 (53,224) (36.4)

Property taxes, insurance and other 27,076 21,833 5,243 (24.0)

Depreciation and amortization 54,881 55,398 (517) (0.9)

Gain on legal settlement (989) — 989

Advisory services fee 16,343 14,545 (1,798) (12.4)

Transaction costs 571 — (571)

Corporate general and administrative 6,077 4,850 (1,227) (25.3)

Total expenses 303,276 242,719 (60,557) (24.9)

Gain (loss) on insurance settlement and disposition of assets 696 10,149 (9,453) (93.1)

Operating income (loss) (5,445) (57,401) 51,956 90.5

Equity in earnings (loss) of unconsolidated entity (198) (138) (60) (43.5)

Interest income 34 165 (131) (79.4)

Other income (expense) — (3,806) 3,806 100.0

Interest expense and amortization of loan costs (22,346) (38,167) 15,821 41.5

Write-off of loan costs and exit fees (1,960) (3,572) 1,612 45.1

Unrealized gain (loss) on derivatives 64 3,748 (3,684) (98.3)

Income (loss) before income taxes (29,851) (99,171) 69,320 69.9

Income tax (expense) benefit (766) 4,622 (5,388) (116.6)

Net income (loss) (30,617) (94,549) 63,932 67.6

(Income) loss attributable to noncontrolling interest in consolidated entities 2,546 4,975 2,429 48.8

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership 3,184 10,036 6,852 68.3

Net income (loss) attributable to the Company $ (24,887) $ (79,538) $ 54,651 68.7 %

All hotel properties owned for the nine months ended September 30, 2021 and 2020 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the nine months ended September 30, 2021 and 2020.

The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties.

The following acquisitions and dispositions affect reporting comparability related to our condensed consolidated financial statements:

Hotel Properties Location Acquisition/Disposition Acquisition/Disposition Date

C Beverly Hills Hotel Los Angeles, CA Acquisition August 5, 2021

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

Nine Months Ended September 30,

Occupancy 49.46 % 31.11 %

ADR (average daily rate) $ 385.28 $ 330.77

RevPAR (revenue per available room) $ 190.58 $ 102.90

Rooms revenue (in thousands) $ 195,720 $ 105,119

Total hotel revenue (in thousands) $ 297,135 $ 175,169

The following table illustrates the key performance indicators of the 13 hotel properties that were included for the full nine months ended September 30, 2021 and 2020:

Nine Months Ended September 30,

Occupancy 49.42 % 31.11 %

ADR (average daily rate) $ 385.63 $ 330.77

RevPAR (revenue per available room) $ 190.60 $ 102.90

Rooms revenue (in thousands) $ 194,187 $ 105,119

Total hotel revenue (in thousands) $ 294,863 $ 175,169

Net Income (Loss) Attributable to the Company.

Net loss attributable to the Company decreased $54.7 million, from $79.5 million for the nine months ended September 30, 2020 (the “2020 period”), to $24.9 million for the nine months ended September 30, 2021 (the “2021 period”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue increased $90.6 million, or 86.2%, to $195.7 million during the 2021 period compared to the 2020 period.

During the 2021 period, we experienced a 1,835 basis point increase in occupancy and a 16.5% increase in room rates compared to the 2020 period.

The increase in rooms revenue is due to the hotel properties recovering from the COVID-19 pandemic as well as an increase of $1.5 million associated with the acquisition of the Mr.

C Beverly Hills Hotel on August 5, 2021.

Fluctuations in rooms revenue between the 2021 period and the 2020 period is a result of the changes in occupancy and ADR between the 2021 period and the 2020 period as reflected in the table below (dollars in thousands):

Hotel Property Favorable (Unfavorable)

Rooms Revenue Occupancy

(change in bps) ADR (change in %)

Capital Hilton (1)

$ (1,146) 449 (30.8) %

Marriott Seattle Waterfront 6,159 2,517 9.1 %

The Notary Hotel 1,480 666 (0.5) %

The Clancy (2)

1,615 2,832 (47.3) %

Sofitel Chicago Magnificent Mile 4,970 1,305 43.4 %

Pier House Resort & Spa 9,294 3,320 25.2 %

The Ritz-Carlton St.

Thomas 29,939 4,786 50.8 %

Park Hyatt Beaver Creek Resort & Spa 2,103 2,326 (28.4) %

Hotel Yountville 5,606 2,722 40.0 %

The Ritz-Carlton Sarasota 14,270 2,465 30.0 %

Hilton La Jolla Torrey Pines 3,928 1,505 8.7 %

Bardessono Hotel and Spa 7,693 2,741 45.2 %

The Ritz-Carlton Lake Tahoe 3,156 1,249 (3.8) %

Total $ 89,067 1,831 16.5 %

Non-comparable

C Beverly Hills Hotel $ 1,534 n/a n/a

_______________

(1) The hotel was closed from April 2020 through mid-August in 2020.

(2) The hotel was being renovated through September 30, 2020.

Food and Beverage Revenue .

Food and beverage revenue increased $21.6 million, or 54.7%, to $61.0 million during the 2021 period compared to the 2020 period.

This increase is primarily driven by the recovery from the COVID-19 pandemic.

We experienced an aggregate increase in food and beverage revenue of $24.3 million at ten comparable hotel properties as well as an increase of $553,000 at the Mr.

C Beverly Hills Hotel.

These increases were partially offset by an aggregate decrease of $3.3 million at Capital Hilton, Hilton La Jolla Torrey Pines and The Notary Hotel.

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $9.8 million, or 32.0%, to $40.4 million during the 2021 period compared to the 2020 period.

The increase is attributable to higher other hotel revenue of $14.0 million at 11 comparable hotel properties and an increase of $186,000 at the Mr.

C Beverly Hills Hotel, partially offset by an aggregate decrease of $381,000 at The Clancy and Capital Hilton as well as lower business interruption revenue of $4.0 million.

During the 2020 period, we recognized business interruption revenue of $4.0 million at The Ritz-Carlton St.

Thomas as a result of Hurricane Irma.

There was no such revenue recorded in the 2021 period.

Rooms Expense .

Rooms expense increased $12.3 million, or 41.9%, to $41.6 million in the 2021 period compared to the 2020 period.

The increase is attributable to an aggregate increase in rooms expense of $12.7 million at 12 comparable hotel properties and an increase of $410,000 at the Mr.

C Beverly Hills Hotel, partially offset by a decrease of $791,000 at the Capital Hilton.

Food and Beverage Expense .

Food and beverage expense increased $15.0 million, or 42.2%, to $50.5 million during the 2021 period compared to the 2020 period.

The increase is attributable to an aggregate increase of $18.0 million at nine comparable hotel properties and an increase of $455,000 at the Mr.

C Beverly Hills Hotel, partially offset by an aggregate decrease of $3.5 million at the Capital Hilton, The Notary Hotel, Hilton La Jolla Torrey Pines and Marriott Seattle Waterfront.

Other Operating Expenses .

Other operating expenses increased $22.6 million, or 29.8%, to $98.1 million in the 2021 period compared to the 2020 period.

Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees.

We experienced an

increase of $5.4 million in direct expenses and $17.2 million in indirect expenses and incentive management fees in the 2021 period compared to the 2020 period.

Direct expenses were 5.1% of total hotel revenue in the 2021 period and 5.6% in the 2020 period.

The increase in direct expenses is associated with higher revenues as all of our comparable hotel properties are recovering from the COVID-19 pandemic and an increase of 13,000 at the Mr.

C Beverly Hills Hotel.

The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $2.0 million comprising an increase of $1.7 million at our 13 comparable hotel properties and $294,000 at the Mr.

C Beverly Hills Hotel;

(ii) marketing costs of $3.7 million comprising an increase of $3.5 million at our 13 comparable hotel properties and $181,000 at the Mr.

C Beverly Hills Hotel;

(iii) repairs and maintenance of $3.3 million comprising an increase of $3.2 million at our 13 comparable hotel properties and $79,000 at the Mr.

C Beverly Hills Hotel;

(iv) lease expense of $667,000 comprising an increase of $662,000 at our 13 comparable hotel properties and $5,000 at the Mr.

C Beverly Hills Hotel;

(v) energy costs of $2.5 million comprised of an increase of $2.4 million at our 13 comparable hotel properties and $153,000 at the Mr.

C Beverly Hills Hotel;

and (vi) incentive management fees of $5.0 million comprising an increase of $5.0 million at our 13 comparable hotel properties and $22,000 at the Mr.

C Beverly Hills Hotel.

Management Fees .

Base management fees increased $3.4 million, or 60.3%, to $9.1 million in the 2021 period compared to the 2020 period.

Management fees increased $3.6 million at eleven comparable hotel properties and $67,000 at the Mr.

C Beverly Hills Hotel, partially offset be an aggregate decrease of approximately $200,000 at the Capital Hilton and The Clancy.

Property Taxes, Insurance and Other .

Property taxes, insurance and other increased $5.2 million, or 24.0%, to $27.1 million in the 2021 period compared to the 2020 period.

The increase is comprised of an aggregate increase of approximately $5.7 million at nine hotel properties.

Approximately $4.9 million of the increase is primarily attributable to higher current year assessments at two hotel properties.

The increase also includes $209,000 at the Mr.

C Beverly Hills Hotel.

These increases were partially offset by an aggregate decrease of approximately $489,000 at four hotel properties.

Depreciation and Amortization .

Depreciation and amortization decreased $517,000, or 0.9%, to $54.9 million for the 2021 period compared to the 2020 period.

The decrease is comprised of an aggregate decrease of $2.7 million at eight comparable hotel properties, partially offset by an increase of $373,000 at the Mr.

C Beverly Hills Hotel and an aggregate increase of $1.8 million at The Clancy, Hotel Yountville, The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota and The Ritz-Carlton Lake Tahoe.

Advisory Services Fee.

Advisory services fee increased $1.8 million, or 12.4%, to $16.3 million in the 2021 period compared to the 2020 period due to increases in the base advisory fee of $402,000, reimbursable expenses of $336,000, as well as an increase in equity-based compensation of $1.1 million.

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

In the 2020 period, we recorded an advisory services fee of $14.5 million, which included a base advisory fee of $7.6 million, reimbursable expenses of $1.4 million and $5.6 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

Gain on Legal Settlement .

In the 2021 period, we recognized a gain of $800,000 related to the settlement of a transfer tax matter with the City of San Francisco and $189,000 related to a billing dispute.

In the 2020 period, there was no such gain recognized.

Transaction costs.

In the 2021 period, we recognized $571,000 of transaction costs associated with the acquisition of the Mr.

C Beverly Hills Hotel.

There were no transaction costs in the 2020 period.

Corporate General and Administrative .

Corporate general and administrative expense was $6.1 million in the 2021 period and $4.9 million in the 2020 period.

The increase in corporate general and administrative expenses is primarily due to higher miscellaneous expenses of $45,000, an increase of $946,000 related to our share of the reimbursed operating expenses of Ashford Securities and higher public company costs of $457,000, partially offset by lower professional fees of $222,000.

The increase in corporate general and administrative expenses is primarily due to higher professional fees of $399,000, higher public company costs of $208,000, higher miscellaneous expenses of $101,000 and higher reimbursed operating expenses of Ashford Securities of $187,000.

Gain (loss) on Insurance Settlement and Disposition of Assets .

In the 2020 period, we recognized a gain of $10.1 million as a result of finalizing the insurance settlement from Hurricane Irma.

In the 2021 period, we recognized a gain of $481,000 associated with proceeds received from an insurance claim, a gain of $18,000 upon disposition of certain fixed assets as well as a gain of $197,000 associated with the sale of certain ERFP assets to Ashford Inc.

In the 2021 quarter, we recognized a gain of $481,000 associated with proceeds received from an insurance claim and a gain of $18,000 upon disposition of certain fixed assets.

There was no such gain (loss) in the 2022 quarter.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2021 period and the 2020 period, we recorded equity in loss of unconsolidated entity of $198,000 and $138,000, respectively, related to our investment in OpenKey.

In the 2022 quarter and the 2021 quarter, we recorded equity in loss of unconsolidated entity of $72,000 and $64,000, respectively, related to our investment in OpenKey.

Interest Income .

Interest income decreased $131,000, or 79.4%, to $34,000 for the 2021 period compared to the 2020 period.

Other Income (Expense) .

Other expense decreased $3.8 million, or 100.0% to $0 in the 2021 period compared to the 2020 period.

In the 2020 period, we recorded a realized loss of $3.6 million on interest rate floors and expense of $191,000 related to CMBX premiums and interest paid on collateral.

Interest Expense and Amortization of Loan Costs .

Interest expense and amortization of loan costs decreased $15.8 million, or 41.5%, to $22.3 million for the 2021 period compared to the 2020 period.

The dec rease i s primarily due to lower interest expense from a lower average LIBOR rate, a credit to interest expense related to the amortization of default interest and late charges recorded on loans that were previously in default and the repayment of our secured term loan.

These decreases were partially offset by higher interest expense from our Convertible Senior Notes and the mortgage loan associated with the Mr.

C Beverly Hills Hotel acquisition.

The average LIBOR rates for the 2021 period and the 2020 period were 0.10% and 0.64%, respectively.

Interest income was $25,000 and $9,000 in the 2022 quarter and the 2021 quarter, respectively.

Interest Expense and Amortization of Discounts and Loan Costs .

Interest expense and amortization of discounts and loan costs increased $1.8 million, or 26.1%, to $8.5 million for the 2022 quarter compared to the 2021 quarter.

The inc rease i s primarily due to higher interest expense from a higher average LIBOR rate, as well as higher interest expense from our Convertible Senior Notes and the mortgage loans associated with the Mr.

C Beverly Hills Hotel and The Ritz-Carlton Reserve Dorado Beach acquisitions.

The average LIBOR rates for the 2022 quarter and the 2021 quarter were 0.23% and 0.12%, respectively.

Write-off of Loan Costs and Exit Fees.

Write-off of loan costs and exit fees was $2.0 million in the 2021 period, primary associated with a $1.2 million write-off of unamortized loan costs upon the payoff of our secured term loan payoff and $351,000 from several amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments.

Write-off of loan costs and exit fees was $76,000 in the 2022 quarter resulting from the refinance of the Park Hyatt Beaver Creek Resort & Spa in February 2022.

Write-off of loan costs and exit fees was $351,000 in the 2021 quarter, resulting from several amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments.

Third-party fees incurred in conjunction with these amendments, totaling $351,000, were expensed in accordance with applicable accounting guidance.

In addition, there was approximately a $419,000 write-off of loan costs upon the $20 million pay-down of the mortgage loan assumed with the acquisition of the Mr.

C Beverly Hills Hotel.

Write-off of loan costs and exit fees was $3.6 million for the 2020 period, resulting from several amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments.

Third-party fees incurred in conjunction with these amendments, totaling $3.6 million, were expensed in accordance with applicable accounting guidance.

Unrealized Gain (Loss) on Derivatives .

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

Unrealized gain on derivatives of $3.7 million for the 2020 period consisted of a $3.6 million unrealized gain on interest rate floors associated with the recognition of realized losses from the expiration of interest rate floors and a $226,000 unrealized gain on CMBX credit default swaps and partially offset by an unrealized loss of $93,000 on interest rate caps.

Unrealized gain on derivatives of $408,000 for the 2022 quarter consisted of an unrealized gain of approximately $843,000 on interest rate caps, partially offset by an unrealized loss of approximately $435,000 on warrants.

Unrealized loss on derivatives of $20,000 in the 2021 quarter consisted of an unrealized loss on interest rate caps.

Income Tax (Expense) Benefit .

Income tax expense changed $5.4 million, from an income tax benefit of $4.6 million in the 2020 period to income tax expense of $766,000 in the 2021 period.

This change was primarily due to an increase in the profitability of our TRS entities in the 2021 period compared to the 2020 period.

Income tax expense changed $2.5 million, from an income tax expense of $145,000 in the 2021 quarter to income tax expense of $2.6 million in the 2022 quarter.

This change was primarily due to an increase in the profitability of our TRS entities in the 2022 quarter compared to the 2021 quarter.

(Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities .

Our noncontrolling interest partner in consolidated entities was allocated a loss of $2.5 million and $5.0 million for the 2021 period and the 2020 period, respectively.

At both September 30, 2021 and 2020, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Our noncontrolling interest partner in consolidated entities was allocated a loss of $26,000 and $1.2 million for the 2022 quarter and the 2021 quarter, respectively.

At both March 31, 2022 and 2021, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership.

Noncontrolling interests in operating partnership were allocated a net loss of $3.2 million and $10.0 million for the 2021 period and the 2020 period, respectively.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 8.35% and 10.08% as of September 30, 2021 and 2020, respectively.

Noncontrolling interests in operating partnership were allocated net income of $967,000 in the 2022 quarter and a net loss of $1.1 million in the 2021 quarter.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 7.84% and 8.87% as of March 31, 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES

COVID-19, Management’s Plans and Liquidity

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

Beginning in late February 2020, we experienced a significant decline in occupancy and RevPAR associated with COVID-19 as we experienced 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.

As of September 30, 2021, the Company maintained unrestricted cash of $195.5 million and restricted cash of $44.8 million.

For the nine months ended September 30, 2021, cash flows provided by operating activities was approximately $55.1 million.

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

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

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

• interest expense and scheduled principal payments on outstanding indebtedness, including our secured term loan (see “Contractual Obligations and Commitments”);

• distributions, if any, in the form of dividends on our common stock, necessary to qualify for taxation as a REIT;

• interest expense and scheduled principal payments on outstanding indebtedness;

• dividends on our common stock;

• dividends on our preferred stock;

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We expect to meet our long-term liquidity requirements through various sources of capital, including future common and preferred equity issuances, existing working capital, net cash provided by operations, hotel mortgage indebtedness and other secured and unsecured borrowings.

However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, including the current and ongoing effects of COVID-19 on our business and the hotel industry, the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity and market perceptions about us.

performance and liquidity and market perceptions about us.

The success of our business strategy will depend, in part, on our ability to access these various capital sources.

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In addition, acquisitions, redevelopments or expansions of hotel properties may require significant capital outlays.

We may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90%

of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains.

We may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains.

As a result, our ability to fund capital expenditures, acquisitions or hotel redevelopment through retained earnings is very limited.

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This could affect our liquidity and our ability to make distributions to our stockholders until such time that a cash trap is no longer in effect for such loan.

These cash trap provisions have been triggered on some of our mortgage loans.

These cash trap provisions have been triggered on some of our mortgage loans, as discussed above.

Our loans may remain subject to cash trap provisions for a substantial period of time which could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.

As of March 31, 2022, our $54 million mortgage loan was in a cash trap.

Approximately $60,000 of our restricted cash was subject to this cash trap.

Equity Transactions

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

No shares were repurchased during the nine months ended September 30, 2021, pursuant to this authorization.

No shares were repurchased during the three months ended March 31, 2022, pursuant to this authorization.

On December 11, 2017, we entered into equity distribution agreements with certain sales agents to sell from time to time shares of our common stock having an aggregate offering price of up to $50.0 million.

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Pursuant to the Side Letter, the sales agents have agreed to reimburse us for up to $50,000 of such expenses, if the sales agents offer and sell an amount of our common stock with an aggregate offering price of $15,000,000, and have agreed to reimburse us for up to an additional $50,000 of such expenses, provided the sales agents offer and sell an amount of our common stock with an aggregate offering price of $30,000,000.

As of November 3, 2021, the Company has sold approximately 7.4 million shares of common stock and received gross proceeds of approximately $30.8 million under this program.

As of May 4, 2022, the Company has sold approximately 7.4 million shares of common stock and received gross proceeds of approximately $30.8 million under this program.

On November 13, 2019, we filed an initial registration statement with the SEC, as amended on January 24, 2020, for shares of our non-traded Series E Redeemable Preferred Stock (the “Series E Preferred Stock”) and our non-traded Series M Redeemable Preferred Stock (the “Series M Preferred Stock”).

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On February 25, 2020, we filed our prospectus with the SEC.

Ashford Securities, a subsidiary of Ashford Inc.

serves as the dealer manager and wholesaler of the Series E Preferred Stock and Series M Preferred Stock.

Ashford Securities, a subsidiary of Ashford Inc., serves as the dealer manager and wholesaler of the Series E Preferred Stock and Series M Preferred Stock.

On April 2, 2021, the Company filed with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”) articles supplementary to the Company’s Articles of Amendment and Restatement that provided for:

(i) reclassifying the existing 28,000,000 shares of Series E Preferred Stock and 28,000,000 shares of Series M Preferred Stock as unissued shares of preferred stock;

(i) reclassifying the existing 28,000,000 shares of Series E Preferred Stock and 28,000,000 shares of Series M Preferred Stock as unissued

shares of preferred stock;

(ii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series E Preferred Stock (the “Series E Articles Supplementary”);

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5 to the Third Amended and Restated Agreement of Limited Partnership to amend the terms of its operating partnership agreement to conform to the terms of the Series E Articles Supplementary and Series M Articles Supplementary.

As of November 3, 2021, the Company has issued approximately 459,000 shares of Series E Preferred Stock and received net proceeds of approximately $10.3 million and issued approximately 17,000 shares of Series M Preferred Stock and received net proceeds of approximately $408,000.

On December 4, 2019, we entered into equity distribution agreements with certain sales agents to sell from time to time shares of our 5.50% Series B Cumulative Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) having an

aggregate offering price of up to $40.0 million.

Sales of shares of the 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 the 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 the Series B Convertible Preferred Stock sold through such sales agents.

Since the inception of the program, we issued approximately 63,000 shares of the Series B Convertible Preferred Stock through our “at-the-market” equity offering program resulting in gross proceeds of approximately $1.0 million before discounts and commissions to the selling agents of approximately $19,000.

On February 4, 2021, the Company entered into the SEDA, pursuant to which the Company will be able to sell the Commitment Amount at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating at the end of the Commitment Period.

Other than with respect to the Initial Advance the shares sold to YA pursuant to the SEDA would be purchased at 95% of the Market Price 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.

At any time during the Commitment Period the Company may require YA to purchase shares of the Company’s common stock by delivering an Advance Notice.

The Company may deliver an Initial Advance for up to 1,200,000 Advance Shares.

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.

As of May 4, 2022, the Company has issued approximately 3.7 million shares of Series E Preferred Stock and received net proceeds of approximately $83.9 million and issued approximately 114,000 shares of Series M Preferred Stock and received net proceeds of approximately $2.8 million.

The Company also issued approximately 7,000 shares of Series E Preferred Stock pursuant to the dividend reinvestment plan.

On February 4, 2021, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd.

(“YA”), pursuant to which the Company will be able to sell up to 7,780,786 shares of its common stock (the “Commitment Amount”) at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating on the earliest of (i) the first day of the month next following the 36-month anniversary of the SEDA or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”).

Other than with respect to the Initial Advance (as defined below) the shares sold to YA pursuant to the SEDA would be purchased at 95% of the Market Price (as defined below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock.

“Market Price” means the lowest daily VWAP of the Company’s common stock during the five consecutive trading days commencing on the trading day following the date the Company submits an advance notice to YA.

“VWAP” means, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the principal market as reported by Bloomberg L.P.

during regular trading hours.

At any time during the Commitment Period the Company may require YA to purchase shares of the Company’s common stock by delivering a written notice to YA setting forth the Advance Shares (as defined in the SEDA) that the Company desires to issue and sell to YA (the “Advance Notice”).

The Company may deliver an Advance Notice for an initial Advance for up to 1,200,000 Advance Shares (the “Initial Advance”).

The preliminary purchase price per share for such shares shall be 100% of the average daily VWAP for the five consecutive trading days immediately prior to the date of the Advance Notice.

Pursuant to the SEDA, we currently intend to use the net proceeds from any sale of the shares for working capital purposes, including the repayment of outstanding debt.

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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 November 3, 2021, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $10.0 million under the SEDA.

From March 16, 2021 through November 3, 2021, Braemar entered into privately negotiated exchange agreements with certain holders of the Series B Convertible Preferred Stock in reliance on Section 3(a)(9) of the Securities Act.

The Company agreed to exchange a total of approximately 2.0 million shares of its common stock for approximately 7.3 million shares of its Series B Convertible Preferred Stock.

On April 21, 2021, Braemar and Lincoln Park, entered into a purchase agreement, pursuant to which the Company may sell to Lincoln Park up to 8,893,565 shares of its common stock, par value $0.01 per share of the Company, from time to time during the term of the purchase agreement.

The issuance of the common stock pursuant to the purchase agreement has been registered pursuant to the Company’s 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.

As of November 3, 2021, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $4.2 million under the Purchase 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 our common stock having an aggregate offering price of up to $50 million (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.

As of November 3, 2021, the Company has sold approximately 8.3 million shares of common stock under the Virtu May 2021 EDA and received gross proceeds of approximately $50.0 million.

As of May 4, 2022, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $10.0 million under the SEDA.

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

The issuance of the shares of common stock pursuant to the Lincoln Park Purchase Agreement has been registered pursuant to the Company’s shelf registration statement on Form S-3 (the “Registration Statement”), and the related base prospectus included in the Registration Statement, as supplemented by a prospectus supplement filed with the SEC on April 21, 2021.

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

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

As of May 4, 2022, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $4.2 million under the Lincoln Park Purchase Agreement .

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

We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold.

The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.

As of November 3, 2021, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.

As of May 4, 2022, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.

Debt Transactions

In May 2021, the Company issued $86.25 million aggregate principal amount of 4.50% Convertible Senior Notes due June 2026 (the “Convertible Senior Notes”).

The net proceeds from this offering of the Convertible Senior Notes were approximately $82.8 million after deducting the underwriting fees and other expenses paid by the Company.

The Convertible Senior Notes are governed by an indenture (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 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.

Each of the loans was extended for one year beyond its original maturity on the same terms as the original loan.

On February 2, 2022, the Company refinanced its mortgage loan secured by the Park Hyatt Beaver Creek Resort & Spa, which had a final maturity date in April 2022.

The new, non-recourse mortgage loan totals $70.5 million and has a two-year initial term with three one-year extension options, subject to the satisfaction of certain conditions.

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

In connection with the refinancing, the Company paid Lismore a fee of approximately $637,000.

On March 11, 2022, in connection with the acquisition of The Ritz-Carlton Reserve Dorado Beach the Company assumed a $54.0 million mortgage loan.

See note 6 to our condensed consolidated financial statements.

Sources and Uses of Cash

We had approximately $195.5 million and $78.6 million of cash and cash equivalents at September 30, 2021 and December 31, 2020, respectively.

We had approximately $185.2 million and $216.0 million of cash and cash equivalents at March 31, 2022 and December 31, 2021, respectively.

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

Net Cash Flows Provided by (Used in) Operating Activities.

Net cash flows provided by (used in) operating activities were $55.1 million and $(35.6) million for the nine months ended September 30, 2021 and 2020, respectively.

Cash flows from operations were impacted by the COVID-19 pandemic and changes in hotel operations of our 13 comparable hotel properties as well the acquisition of the Mr.

C Beverly Hills Hotel on August 5, 2021.

Net cash flows provided by (used in) operating activities were $28.8 million and $12.0 million for the three months ended March 31, 2022 and 2021, respectively.

Cash flows from operations were impacted by the COVID-19 pandemic and changes in hotel operations of our 13 comparable hotel properties as well the acquisitions of the Mr.

C Beverly Hills Hotel on August 5, 2021 and The Ritz-Carlton Reserve Dorado Beach on March 11, 2022.

Cash flows from operations are also impacted by the timing of working capital cash flows such as collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties, settling with hotel managers and timing differences between the receipt of proceeds from business interruption insurance claims and the recognition of the related revenue.

Net Cash Flows Provided by (Used in) Investing Activities .

For the nine months ended September 30, 2021, net cash flows used in investing activities were $23.7 million.

These cash outflows were primarily attributable to $15.8 million of capital improvements made to various hotel properties, approximately $9.5 million associated with the acquisition of the Mr.

C Beverly Hills Hotel, partially offset by proceeds of $1.8 million from the sale of certain ERFP assets to Ashford Inc.

For the nine months ended September 30, 2020, net cash flows used in investing activities were $18.9 million.

These cash outflows were primarily attributable to $21.5 million of capital improvements made to various hotel properties offset by $2.5 million of insurance proceeds received related to the hurricanes.

For the three months ended March 31, 2022, net cash flows used in investing activities were $97.7 million.

These cash outflows were primarily attributable to $10.8 million of capital improvements made to various hotel properties, approximately $87.0 million associated with the acquisition of The Ritz-Carlton Reserve Dorado Beach.

Our capital improvements consisted of $8.0 million of return on investment capital projects and $2.8 million of renewal and replacement capital projects.

Return on investment capital projects are designed to improve the positioning of our hotel properties within their markets and competitive set.

Renewal and replacement capital projects are designed to maintain the quality and competitiveness of our hotels.

For the three months ended March 31, 2021, net cash flows used in investing activities were $4.5 million.

These cash outflows were primarily attributable to $4.7 million of capital improvements made to various hotel properties, partially offset by proceeds of $200,000 from the disposition of assets.

Our capital improvements consisted of $2.3 million of return on investment capital projects and $2.4 million of renewal and replacement capital projects.

Net Cash Flows Provided by (Used in) Financing Activities.

For the nine months ended September 30, 2021, net cash flows provided by financing activities were $95.6 million.

Cash inflows primarily consisted of net proceeds of $83.2 million from the issuance of our Convertible Senior Notes, $100.0 million from the issuance of common stock, $4.6 million from the issuance of preferred stock and contributions of $920,000 from a noncontrolling interest in consolidated entities.

For the three months ended March 31, 2022, net cash flows provided by financing activities were $31.9 million.

Cash inflows primarily consisted of debt borrowings of $70.5 million, $33.7 million from the issuance of preferred stock and contributions of $164,000 from a noncontrolling interest in consolidated entities.

The cash inflows were partially offset by repayments of indebtedness of $67.8 million, $3.0 million of dividend and distribution payments and $1.7 million of payments for loan costs and fees.

For the nine months ended September 30, 2020, net cash flows provided by financing activities were $47.1 million.

Cash inflows primarily consisted of borrowings on indebtedness of $109.3 million, net proceeds of $6.4 million from the “at-the-market” common stock offering and $474,000 from the issuance of preferred stock, partially offset by repayments on indebtedness of $46.0 million, $13.6 million of dividend and distribution payments, $6.5 million of payments for loan costs and fees associated with loan forbearance, and distributions of $2.6 million to a noncontrolling interest in consolidated entities.

For the three months ended March 31, 2021, net cash flows provided by financing activities were $4.4 million.

Cash inflows primarily consisted of net proceeds of $18.2 million from the issuance of common stock, partially offset by repayments of indebtedness of $10.8 million, $2.6 million of dividend and distribution payments and $365,000 of payments for loan costs and fees associated with loan forbearance.

Dividend Policy.

In December 2019, the board of directors approved our dividend policy for 2020, which stated our then-expectation to pay a quarterly dividend of $0.16 per share during 2020.

As previously disclosed, the approval of our dividend policy did not commit our board of directors to declare future dividends with respect to any quantity or the amount thereof.

On March 16, 2020, the Company and its board of directors announced a suspension of its previously disclosed 2020 common stock dividend policy.

The Company did not pay a dividend on its common stock during any quarter of 2020.

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.

The board of directors will continue to review our dividend policy and make announcements with respect thereto.

For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof.

Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months.

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However, we cannot make any assurances that we will make distributions in the future.

Contractual Obligations and Commitments

There have been no material changes, outside of the ordinary course of business, as of September 30, 2021 to contractual obligations specified in the table of contractual obligations included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Form 10-K.

Off-Balance Sheet Arrangements

In the normal course of business, we may form or invest in partnerships or joint ventures.

We evaluate each partnership and joint venture to determine whether the entity is a variable interest entity.

If the entity is determined to be a VIE we assess whether we are the primary beneficiary and need to consolidate the entity.

For further discussion see note 2 to our consolidated financial statements.

We have no other off-balance sheet arrangements.

Critical Accounting Policies

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In addition, we excluded impairment on real estate, (gain) loss on insurance settlement and disposition of assets and Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by NAREIT.

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

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

We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they reflect more accurately the ongoing performance of our hotel assets and other investments and provide more useful information to investors as they are indicators of our ability to meet our future debt payment requirements, working capital requirements and they provide an overall evaluation of our financial condition.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net income (loss) $ 15,604 $ (11,034)

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Transaction and conversion costs 555 340

Other (income) expense — 3,604 — 3,806

Write-off of loan costs and exit fees 76 351

Unrealized (gain) loss on derivatives (408) 20

Non-cash stock/unit-based compensation 3,044 2,006 7,265 6,039

Stock/unit-based compensation 2,365 1,416

Legal, advisory and settlement costs 317 205

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NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP.

Our calculation of Adjusted FFO excludes dividends on Series B Convertible Preferred Stock, gain/loss on extinguishment of preferred stock, transaction and conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, other income/expense and non-cash items such as interest expense on Convertible Senior Notes, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives, stock/unit-based compensation and the Company’s portion of adjustments to FFO of OpenKey.

Our calculation of Adjusted FFO excludes dividends on Series B Convertible Preferred Stock, gain/loss on extinguishment of preferred stock, transaction and conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, other income/expense, stock/unit-based compensation and non-cash items such as interest expense on Convertible Senior Notes, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives and the Company’s portion of adjustments to FFO of OpenKey.

FFO and Adjusted FFO exclude amounts attributable to the portion of a partnership owned by the third-party.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net income (loss) $ 15,604 $ (11,034)

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Transaction and conversion costs 555 340

Other (income) expense — 3,604 — 3,806

Interest expense on Convertible Senior Notes 1,103 —

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Amortization of loan costs (1)

407 670 1,684 2,651

Unrealized (gain) loss on derivatives (408) 20

Non-cash stock/unit-based compensation 3,044 2,006 7,265 6,039

Stock/unit-based compensation 2,365 1,416

Legal, advisory and settlement costs 317 205

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The following table presents the amounts of the adjustments for noncontrolling interests for each line item:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Depreciation and amortization on real estate $ (646) $ (694)

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Los Angeles, CA 143 100 % 143

The Ritz-Carlton Reserve Dorado Beach (3)

Dorado, Puerto Rico 96 100 % 96

Ground Lease Properties (4)

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Total 3,971 3,736

(1) The above information does not include the operations of ten condominium units not owned by The Ritz-Carlton Lake Tahoe.

(1) The above information does not include the operations of condominium units not owned by The Ritz-Carlton Lake Tahoe.

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

The results of the Mr.

C Beverly Hills Hotel and the five adjacent luxury residences are included from August 5, 2021 through December 31, 2021.

(3) The above information does not include the operations of residential units not owned by The Ritz-Carlton Reserve Dorado Beach.

The results of the Hotel are included from March 11, 2022 through March 31, 2022.

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

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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-Q

Item 2. Management’s Discussion and Analysis