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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-06 · 291 added, 122 removed, 429 unchanged (49% of the section changed)

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• 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;

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• 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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High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S.

national average RevPAR for all hotels as determined by Smith Travel Research.

national average RevPAR for all hotels as determined by STR, LLC.

Two times the U.S.

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

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

As of June 30, 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 March 31, 2022, Remington Hotels, a subsidiary of Ashford Inc., managed four of our 15 hotel properties.

As of June 30, 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 March 31, 2022, owned approximately 610,246 shares of Ashford Inc.

Archie Bennett, Jr., as of June 30, 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 March 31, 2022 would have increased the Bennetts’ ownership interest in Ashford Inc.

common stock, which if exercised as of June 30, 2022 would have increased the Bennetts’ ownership interest in Ashford Inc.

to 64.7% subject to applicable voting limitations;

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include 360,000 shares owned by trusts.

As of March 31, 2022, Mr.

As of June 30, 2022, Mr.

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

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Recent Developments

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.

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.

and Ashford Hospitality Services, LLC, a subsidiary of Ashford Inc.

(“Ashford Services”), agreed with Jeremy Welter, the Chief Operating Officer of Ashford Inc., that, effective on July 15, 2022, Mr.

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

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.

Welter was also the Chief Operating Officer of the Company and accordingly his service as Chief Operating Officer of the Company also ended on July 15, 2022.

Key Indicators of Operating Performance

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RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR.

For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense.

For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in

increased other operating department revenue and expense.

Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs.

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RESULTS OF OPERATIONS

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)

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

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

Three Months Ended June 30, Favorable (Unfavorable)

2022 2021 $ Change % Change

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Other 20,098 13,420 6,678 49.8

Total revenue 174,894 97,110 77,784 80.1

Hotel operating expenses:

Rooms 24,134 13,482 (10,652) (79.0)

Food and beverage 31,894 16,322 (15,572) (95.4)

Other expenses 52,087 33,476 (18,611) (55.6)

Management fees 5,538 2,952 (2,586) (87.6)

Total hotel operating expenses 113,653 66,232 (47,421) (71.6)

Property taxes, insurance and other 5,277 7,190 1,913 26.6

Depreciation and amortization 19,571 18,244 (1,327) (7.3)

Advisory services fee 6,305 6,739 434 6.4

(Gain) loss on legal settlements (114) (989) (875) (88.5)

Transaction costs — 296 296 (100.0)

Corporate general and administrative 3,438 2,383 (1,055) (44.3)

Total expenses 148,130 100,095 (48,035) (48.0)

Gain (loss) on insurance settlement and disposition of assets — 197 (197) (100.0)

Operating income (loss) 26,764 (2,788) 29,552 1,060.0

Equity in earnings (loss) of unconsolidated entity (74) (66) (8) (12.1)

Interest income 162 12 150 1,250.0

Interest expense and amortization of loan costs (10,281) (7,226) (3,055) (42.3)

Write-off of loan costs and exit fees (22) (1,177) 1,155 98.1

Unrealized gain (loss) on derivatives 1,208 (58) 1,266 2,182.8

Income (loss) before income taxes 17,757 (11,303) 29,060 257.1

Income tax (expense) benefit (1,077) (61) (1,016) (1,665.6)

Net income (loss) 16,680 (11,364) 28,044 246.8

(Income) loss attributable to noncontrolling interest in consolidated entities (1,468) 849 (2,317) (272.9)

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership (846) 1,282 (2,128) (166.0)

Net income (loss) attributable to the Company $ 14,366 $ (9,233) $ 23,599 255.6 %

All hotel properties owned for the three months ended June 30, 2022 and 2021 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended June 30, 2022 and 2021.

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

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

Hotel Properties Location Type Date

C Beverly Hills Hotel Los Angeles, CA 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 owned for the periods indicated:

Three Months Ended June 30,

Occupancy 71.15 % 49.18 %

ADR (average daily rate) $ 435.24 $ 382.21

RevPAR (revenue per available room) $ 309.68 $ 187.97

Rooms revenue (in thousands) $ 112,527 $ 63,837

Total hotel revenue (in thousands) $ 174,894 $ 97,110

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

Three Months Ended June 30,

Occupancy 71.01 % 49.18 %

ADR (average daily rate) $ 401.68 $ 382.21

RevPAR (revenue per available room) $ 285.23 $ 187.97

Rooms revenue (in thousands) $ 97,181 $ 63,837

Total hotel revenue (in thousands) $ 150,061 $ 97,110

Net Income (Loss) Attributable to the Company.

Net income (loss) attributable to the Company changed $23.6 million, from a net loss of $9.2 million for the three months ended June 30, 2021 (the “2021 quarter”) to net income $14.4 million for the three months ended June 30, 2022 (the “2022 quarter”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue increased $48.7 million, or 76.3%, to $112.5 million during the 2022 quarter compared to the 2021 quarter.

During the 2022 quarter, we experienced a 2,197 basis point increase in occupancy and a 13.9% 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 increases of $3.4 million and $11.9 million associated with the acquisitions of the Mr.

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

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

Hotel Property Favorable (Unfavorable)

Rooms Revenue Occupancy

(change in bps) ADR (change in %)

Capital Hilton $ 8,515 5,789 91.2 %

Marriott Seattle Waterfront 2,410 946 46.7 %

The Notary Hotel 3,743 2,947 34.1 %

The Clancy 6,931 2,774 124.7 %

Sofitel Chicago Magnificent Mile 4,587 3,399 38.5 %

Pier House Resort & Spa 318 (1,687) 28.5 %

The Ritz-Carlton St.

Thomas 39 (486) 6.1 %

Park Hyatt Beaver Creek Resort & Spa 752 1,319 4.8 %

Hotel Yountville 881 (871) 43.6 %

The Ritz-Carlton Sarasota 1,437 (135) 10.5 %

Hilton La Jolla Torrey Pines 3,340 2,368 28.4 %

Bardessono Hotel and Spa 894 (553) 27.7 %

The Ritz-Carlton Lake Tahoe (503) (679) (0.6) %

Total $ 33,344 2,183 5.1 %

Non-comparable

C Beverly Hills Hotel $ 3,418 n/a n/a

The Ritz-Carlton Reserve Dorado Beach 11,928 n/a n/a

Total $ 15,346

Food and Beverage Revenue .

Food and beverage revenue increased $22.4 million, or 112.9%, to $42.3 million during the 2022 quarter compared to the 2021 quarter.

This increase is attributable to an aggregate increase at all comparable hotel properties of $16.2 million as they are recovering from the COVID-19 pandemic, as well as an increase of $1.5 million resulting from the acquisition of the Mr.

C Beverly Hills Hotel on August 5, 2021 and $4.7 million with the acquisition of the Ritz-Carlton Reserve Dorado Beach on March 11, 2022, respectively.

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 $6.7 million, or 49.8%, to $20.1 million during the 2022 quarter compared to the 2021 quarter.

The increase is attributable to an aggregate increase in other hotel revenue of $3.7 million at 10 comparable hotel properties and increases of $368,000 and $2.9 million at the Mr.

C Beverly Hills Hotel and the Ritz-Carlton Reserve Dorado Beach, respectively, partially offset by an aggregate decrease of $327,000 at Pier House Resort & Spa, Marriott Seattle Waterfront and The Ritz-Carlton Lake Tahoe.

Rooms Expense .

Rooms expense increased $10.7 million, or 79.0%, to $24.1 million in the 2022 quarter compared to the 2021 quarter.

This increase is primarily attributable to an aggregate increase of $3.6 million at 12 comparable hotel properties as they are recovering from the COVID-19 pandemic and increases of $938,000 and $2.7 million at the Mr.

C Beverly Hills Hotel and the Ritz-Carlton Reserve Dorado Beach, respectively, partially offset by a decrease of $27,000 at The Ritz-Carlton Lake Tahoe.

Food and Beverage Expense .

Food and beverage expense increased $15.6 million, or 95.4%, to $31.9 million during the 2022 quarter compared to the 2021 quarter.

This increase is attributable to an aggregate increase of $10.3 million at all comparable hotel properties and an increase of $1.1 million and $4.2 million at the Mr.

C Beverly Hills Hotel and the Ritz-Carlton Reserve Dorado Beach, respectively.

Other Operating Expenses .

Other operating expenses increased $18.6 million, or 55.6%, to $52.1 million in the 2022 quarter compared to the 2021 quarter.

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

We experienced an increase of $2.2 million in direct expenses and $16.4 million in indirect expenses and incentive management fees in the 2022 quarter as compared to the 2021 quarter as the hotel properties are recovering from the COVID-19 pandemic.

Direct expenses were 4.2% of total hotel revenue in the 2022 quarter and 5.3% 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 $23,000 and $1.6 million at the Mr.

C Beverly Hills Hotel and the Ritz-Carlton Reserve Dorado Beach, respectively.

The increase in indirect expenses comprises increases in:

(i) general and administrative costs of $7.2 million comprising an increase of $4.4 million at our 13 comparable hotel properties and $2.8 million at the two acquired hotel properties;

(ii) marketing costs of $5.0 million comprising an increase of $3.7 million at our 13 comparable hotel properties and $1.3 million at the two acquired hotel properties;

(iii) repairs and maintenance of $1.7 million, comprising an increase of $672,000 at our 13 comparable hotel properties and $1.0 million at the two acquired hotel properties;

(iv) lease expense of $527,000 comprising an increase of $423,000 at our 13 comparable hotel properties and $104,000 at the two acquired hotel properties;

(v) energy costs of $1.7 million comprising an increase of $628,000 at our 13 comparable hotel properties and $1.0 million at the two acquired hotel properties;

and (vi) incentive management fees of $257,000 comprising an increase of $375,000 at the two acquired hotel properties, partially offset by a decrease of $118,000 at our 13 comparable hotel properties.

Management Fees .

Base management fees increased $2.6 million, or 87.6%, to $5.5 million in the 2022 quarter compared to the 2021 quarter.

Base management fees increased $1.8 million at our comparable hotel properties and $771,000 at the two acquired hotel properties.

Property Taxes, Insurance and Other .

Property taxes, insurance and other decreased $1.9 million, or 26.6%, to $5.3 million in the 2022 quarter compared to the 2021 quarter.

The decrease is mainly composed of an aggregate decrease of approximately $3.1 million at nine hotel properties, including a $2.4 million decrease at the Sofitel Chicago Magnificent Mile due to lower property tax assessments.

The decrease is partially offset by an aggregate increase of $249,000 at four comparable hotel properties as well as increases of $330,000 at the Mr.

C Beverly Hills Hotel and $568,000 at The Ritz-Carlton Reserve Dorado Beach as a result of their acquisitions.

Depreciation and Amortization .

Depreciation and amortization increased $1.3 million, or 7.3%, to $19.6 million in the 2022 quarter compared to the 2021 quarter.

The increase comprised $611,000 at the Mr.

C Beverly Hills Hotel and $1.6 million at The Ritz-Carlton Reserve Dorado Beach as a result of their acquisitions as well as an aggregate increase of $570,000 at the Park Hyatt Beaver Creek Resort & Spa, Marriott Seattle Waterfront, The Ritz-Carlton St.

Thomas and The Ritz-Carlton Lake Tahoe.

These increases were partially offset by an aggregate decrease of $1.4 million at nine comparable hotel properties primarily due to fully depreciated assets.

Advisory Services Fee.

Advisory services fee decreased $434,000, or 6.4%, to $6.3 million in the 2022 quarter compared to the 2021 quarter due to increases in the base advisory fee of $548,000, reimbursable expenses of $663,000 and equity-based compensation of $352,000, partially offset by a decrease in incentive fee of $2.0 million.

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

and a credit to incentive fee of $731,000.

In the 2021 quarter, we recorded an advisory services fee of $6.7 million, which included a base advisory fee of $2.7 million, reimbursable expenses of $510,000, incentive fee of $1.3 million and $2.3 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

Gain on legal settlements.

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

During the 2022 quarter, the Company received an additional payment of approximately $114,000 related to accrued interest on the initial settlement amount associated with the City of San Francisco transfer tax matter.

Transaction Costs.

In the 2021 quarter, we recognized transactions costs of $296,000 associated with the acquisition of the Mr.

C Beverly Hills Hotel.

There were no transaction costs in the 2022 quarter.

Corporate General and Administrative .

Corporate general and administrative expense was $3.4 million in the 2022 quarter and $2.4 million in the 2021 quarter.

The increase in corporate general and administrative expense is due to higher professional fees of $391,000, higher public company costs of $139,000, higher reimbursed operating expenses of Ashford Securities of $141,000, and higher miscellaneous expenses of $384,000.

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

In the 2021 quarter, we recognized a gain of $197,000 associated with the sale of certain ERFP assets to Ashford Inc.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2022 quarter and 2021 quarter, we recorded equity in loss of unconsolidated entity of $74,000 and $66,000, respectively, related to our investment in OpenKey.

Interest Income .

Interest income was $162,000 and $12,000 in 2022 quarter and 2021 quarter, respectively.

Interest Expense and Amortization of Loan Costs .

Interest expense and amortization of loan costs increased $3.1 million, or 42.3%, to $10.3 million in the 2022 quarter compared to the 2021 quarter.

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

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

The average LIBOR rates in the 2022 quarter and the 2021 quarter were 1.02% and 0.10%, respectively.

Write-off of Loan Costs and Exit Fees.

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

Write-off of loan costs and exit fees was $1.2 million in the 2021 quarter, primarily associated with the $1.2 million write-off of unamortized loan costs upon the payoff of our secured term loan.

Unrealized Gain (Loss) on Derivatives .

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

Unrealized loss on derivatives of $58,000 in the 2021 quarter consisted of unrealized loss on interest rate caps.

Income Tax (Expense) Benefit .

Income tax expense increased $1.0 million, from $61,000 in the 2021 quarter to $1.1 million in the 2022 quarter.

This increase 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 income of $1.5 million and a loss of $849,000 in the 2022 quarter and the 2021 quarter, respectively.

At both June 30, 2022 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 net income of $846,000 and a net loss of $1.3 million in the 2022 quarter and the 2021 quarter, respectively.

Redeemable noncontrolling interests in Braemar OP represented ownership interests of 7.59% and 7.62% as of June 30, 2022 and 2021, respectively.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

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

Six Months Ended June 30, Favorable (Unfavorable)

2022 2021 $ Change % Change

Rooms $ 217,719 $ 118,160 $ 99,559 84.3 %

Food and beverage 78,976 36,482 42,494 116.5

Other 40,079 26,316 13,763 52.3

Total hotel revenue 336,774 180,958 155,816 86.1

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Advisory services fee 13,627 11,534 (2,093) (18.1)

Gain on legal settlement (114) (989) (875) (88.5)

Transaction costs — 296 296 100.0

Corporate general and administrative 5,933 3,983 (1,950) (49.0)

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Net income (loss) attributable to the Company $ 29,029 $ (17,941) $ 46,970 261.8 %

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.

All hotel properties owned for the six months ended June 30, 2022 and 2021 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the six months ended June 30, 2022 and 2021.

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

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

Three Months Ended March 31,

Six Months Ended June 30,

Occupancy 63.18 % 43.13 %

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Total hotel revenue (in thousands) $ 336,774 $ 180,958

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,

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

Six Months Ended June 30,

Occupancy 62.75 % 43.13 %

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Net Income (Loss) Attributable to the Company.

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.

Net income (loss) attributable to the Company changed $47.0 million, from a net loss of $17.9 million for the six months ended June 30, 2021 (the “2021 period”), to net income of $29.0 million for the six months ended June 30, 2022 (the “2022 period”), 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 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.

Rooms revenue increased $99.6 million, or 84.3%, to $217.7 million during the 2022 period compared to the 2021 period.

During the 2022 period, we experienced a 2,005 basis point increase in occupancy and a 18.8% increase in room rates compared to the 2021 period.

The increase in rooms revenue is due to the hotel properties recovering from the COVID-19 pandemic as well as an increase of $6.7 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):

C Beverly Hills Hotel on August 5, 2021 and $17.4 million with the acquisition of the Ritz-Carlton Reserve Dorado Beach on March 11, 2022, respectively.

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

Hotel Property Favorable (Unfavorable)

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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.

Food and beverage revenue increased $42.5 million, or 116.5%, to $79.0 million during the 2022 period compared to the 2021 period.

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

We experienced an aggregate increase in food and beverage revenue of $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.

We experienced an aggregate increase in food and beverage revenue of $34.1 million at 13 comparable hotel properties as well as increases of $2.6 million and $5.8 million at the Mr.

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

Other Hotel Revenue .

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

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $13.8 million, or 52.3%, to $40.1 million during the 2022 period compared to the 2021 period.

The increase is attributable to higher other hotel revenue of $9.3 million at 13 comparable hotel properties and an increase of $647,000 at the Mr.

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

C Beverly Hills Hotel and $3.8 million 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.

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.

Rooms expense increased $19.8 million, or 80.9%, to $44.3 million in the 2022 period compared to the 2021 period.

The increase is attributable to an aggregate increase in rooms expense of $14.5 million at 13 comparable hotel properties due to the hotel properties recovering from the COVID-19 pandemic and increases of $1.8 million at the Mr.

C Beverly Hills Hotel and $3.5 million 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.

Food and beverage expense increased $29.6 million, or 97.9%, to $59.9 million during the 2022 period compared to the 2021 period.

The increase is attributable to an aggregate increase of $22.7 million at 13 comparable hotel properties and increases of $2.1 million at the Mr.

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

C Beverly Hills Hotel and $4.8 million at The Ritz-Carlton Reserve Dorado Beach.

Other Operating Expenses .

Other operating expenses increased $17.7 million, or 61.9%, to $46.2 million in the 2022 quarter compared to the 2021 quarter.

Other operating expenses increased $36.3 million, or 58.5%, to $98.3 million in the 2022 period compared to the 2021 period.

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

We experienced an increase of $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.

We experienced an increase of $4.1 million in direct expenses and $32.2 million in indirect expenses and incentive management fees in the 2022 period compared to the 2021 period.

Direct expenses were 4.2% of total hotel revenue in the 2022 period and 5.6% in the 2021 period.

The increase in direct expenses is associated with higher direct expenses at our comparable hotel properties as they are recovering from the COVID-19 pandemic, as well as an increase of $59,000 at the Mr.

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

C Beverly Hills Hotel and $2.0 million at The Ritz-Carlton Reserve Dorado Beach.

The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $12.3 million comprising an increase of $8.4 million at our 13 comparable hotel properties and $3.8 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;

(ii) marketing costs of $8.8 million comprising an increase of $7.0 million at our 13 comparable hotel properties and $1.9 million at the two acquired hotel properties;

(iii) repairs and maintenance of $3.3 million comprising an increase of $1.9 million at our 13 comparable hotel properties and $1.4 million at the two acquired hotel properties;

(iv) lease expense of $779,000 comprising an increase of $661,000 at our 13 comparable hotel properties and $118,000 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;

(v) energy costs of $2.9 million comprised of an increase of $1.5 million at our 13 comparable hotel properties and $1.4 million at the two acquired hotel properties;

and (vi) incentive management fees of $4.0 million comprising an increase of $3.5 million at our 13 comparable hotel properties and $497,000 at the two acquired hotel properties.

Management Fees .

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

Base management fees increased $4.2 million, or 76.6%, to $9.7 million in the 2022 period compared to the 2021 period.

Management fees increased approximately $3.6 million at 12 of our comparable hotel properties, $293,000 at the Mr.

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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 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.

Property taxes, insurance and other decreased $574,000, or 4.0%, to $13.9 million in the 2022 period compared to the 2021 period.

The decrease is mainly resulted from an aggregate decrease of $2.5 million at seven hotel properties, including a $1.3 million decrease at the Sofitel Chicago Magnificent Mile due to lower property tax assessments.

The decrease is partially offset by increases of $658,000 at the Mr.

C Beverly Hills Hotel and $809,000 at The Ritz-Carlton Reserve Dorado Beach as a result of their acquisitions, as well as an aggregate increase of approximately $422,000 at six hotel properties.

Depreciation and Amortization .

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.

Depreciation and amortization increased $1.4 million, or 3.9%, to $38.0 million for the 2022 period compared to the 2021 period.

The increase comprised $1.2 million at the Mr.

C Beverly Hills Hotel and $1.9 million at The Ritz-Carlton Reserve Dorado Beach as a result of their acquisitions as well as an aggregate increase of $952,000 at the Park Hyatt Beaver Creek Resort & Spa, Marriott Seattle Waterfront, The Ritz-Carlton St.

Thomas and The Ritz-Carlton Lake Tahoe.

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

These increases were partially offset by an aggregate decrease of $2.7 million at nine comparable hotel properties primarily due to fully depreciated assets.

Advisory Services Fee.

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.

Advisory services fee increased $2.1 million, or 18.1%, to $13.6 million in the 2022 period compared to the 2021 period due to increases in the base advisory fee of $942,000, reimbursable expenses of $1.3 million and equity-based compensation of $1.3 million, partially offset by a decrease in incentive fee of $1.4 million.

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

and an incentive fee of $246,000.

In the 2021 period, we recorded an advisory services fee of $11.5 million, which included a base advisory fee of $5.2 million, reimbursable expenses of $1.0 million, $3.7 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

and an incentive fee of $1.6 million.

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.

During the 2022 period, the Company received an additional payment of approximately $114,000 related to accrued interest on the initial settlement amount associated with the City of San Francisco transfer tax matter.

Transaction costs .

In the 2021 period, we recognized $296,000 of transaction costs associated with the acquisition of the Mr.

C Beverly Hills Hotel that closed on August 5, 2021.

There were no transaction costs in the 2022 period.

Corporate General and Administrative .

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

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.

Corporate general and administrative expense was $5.9 million in the 2022 period and $4.0 million in the 2021 period.

The increase in corporate general and administrative expenses is primarily due to higher professional fees of $790,000, higher public company costs of $347,000, higher reimbursed operating expenses of Ashford Securities of $328,000 and higher miscellaneous expenses of $485,000.

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

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.

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

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

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2022 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.

In the 2022 period and the 2021 period, we recorded equity in loss of unconsolidated entity of $146,000 and $130,000, respectively, related to our investment in OpenKey.

Interest Income .

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

Interest income was $187,000 and $21,000 in the 2022 period and the 2021 period, 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.

Interest expense and amortization of discounts and loan costs increased $4.8 million, or 34.5%, to $18.8 million for the 2022 period compared to the 2021 period.

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.

The average LIBOR rates for the 2022 period and the 2021 period were 0.62% and 0.11%, respectively.

Write-off of Loan Costs and Exit Fees.

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.

Write-off of loan costs and exit fees was $98,000 in the 2022 period primarily resulting from the refinance of the Park Hyatt Beaver Creek Resort & Spa in February 2022 and the acquisition of the Ritz-Carlton Reserve Dorado Beach.

Write-off of loan costs and exit fees was $1.5 million in the 2021 period, primarily associated with a $1.2 million write-off of unamortized loan costs upon the payoff of our secured term loan payoff and $351,000 from several amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments.

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

Unrealized Gain (Loss) on Derivatives .

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.

Unrealized gain on derivatives of $1.6 million for the 2022 period consisted of an unrealized gain of approximately $886,000 on interest rate caps, and approximately $730,000 on warrants.

Unrealized loss on derivatives of $78,000 for the 2021 period consisted of unrealized loss on interest rate caps.

Income Tax (Expense) Benefit .

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 tax expense increased $3.5 million, from $206,000 in the 2021 period to $3.7 million in the 2022 period.

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

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

Our noncontrolling interest partner in consolidated entities was allocated 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.

Our noncontrolling interest partner in consolidated entities was allocated income of $1.4 million and a loss of $2.1 million for the 2022 period and the 2021 period, respectively.

At both June 30, 2022 and 2021, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

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

Noncontrolling interests in operating partnership were allocated net income of $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.

Noncontrolling interests in operating partnership were allocated net income of $1.8 million in the 2022 period and a net loss of $2.4 million in the 2021 period.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 7.59% and 7.62% as of June 30, 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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

Thus, even if our total market capitalization and performance decline, we will still be required to make payments to our advisor equal to the minimum base advisory fee, which could adversely impact our liquidity and financial condition.

Thus, even if our total market capitalization and

performance decline, we will still be required to make payments to our advisor equal to the minimum base advisory fee, which could adversely impact our liquidity and financial condition.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotel properties and redevelopments, renovations, expansions and other capital expenditures that need to be made periodically with respect to our hotel properties and scheduled debt payments.

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

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

performance and liquidity and market perceptions about us.

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

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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.

As of June 30, 2022, our $435 million mortgage loan and our $195 million mortgage loan were in cash traps and approximately $106,000 of our restricted cash was subject to these cash traps.

Equity Transactions

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

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

No shares were repurchased during the six months ended June 30, 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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On July 7, 2020, we entered into a side letter (the “Side Letter”) with the sales agents pursuant to which we agreed to pay all reasonable documented out-of-pocket expenses, including the reasonable fees and disbursements of counsel incurred by the sales agents, in connection with the ongoing services contemplated by the equity distribution agreements (subject to a $75,000 cap on certain expenses incurred in June 2020).

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

As of 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.

price of $30,000,000.

As of August 3, 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 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 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.

As of August 3, 2022, the Company has issued approximately 6.5 million shares of Series E Preferred Stock and received net proceeds of approximately $145.3 million and issued approximately 666,000 shares of Series M Preferred Stock and received net proceeds of approximately $16.1 million.

The Company also issued approximately 16,000 shares of Series E Preferred Stock pursuant to the dividend reinvestment plan.

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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 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.

As of August 3, 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.

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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 .

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 August 3, 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.

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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 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.

As of August 3, 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

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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.

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Sources and Uses of Cash

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 had approximately $251.0 million and $216.0 million of cash and cash equivalents at June 30, 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 $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.

Net cash flows provided by operating activities were $79.8 million and $31.5 million for the six months ended June 30, 2022 and 2021, respectively.

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

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

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

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.

For the six months ended June 30, 2022, net cash flows used in investing activities were $106.8 million.

These cash outflows were primarily attributable to $19.9 million of capital improvements made to various hotel properties and approximately $86.8 million associated with the acquisition of The Ritz-Carlton Reserve Dorado Beach.

Our capital improvements consisted of $13.4 million of return on investment capital projects and $6.5 million of renewal and replacement capital projects.

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

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

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

For the 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.

For the six months ended June 30, 2021, net cash flows used in investing activities were $10.3 million.

These cash outflows were primarily attributable to $9.1 million of capital improvements made to various hotel properties and a deposit of $3.0 million associated with the acquisition of the Mr.

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

Our capital improvements consisted of $3.1 million of return on investment capital projects and $6.0 million of renewal and replacement capital projects.

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

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

For the six months ended June 30, 2022, net cash flows provided by financing activities were $62.8 million.

Cash inflows primarily consisted of debt borrowings of $70.5 million, $71.0 million from the issuance of preferred stock and contributions of $164,000 from a noncontrolling interest in consolidated entities.

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

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.

The cash inflows were partially offset by repayments of indebtedness of $68.0 million, $7.3 million of dividend and distribution payments, $1.7 million of payments for loan costs and fees and $1.1 million of payments for derivatives.

For the six months ended June 30, 2021, net cash flows provided by financing activities were $80.7 million.

Cash inflows primarily consisted of net proceeds of $83.2 million from the issuance of our Convertible Senior Notes, $65.7 million from the issuance of common stock and contributions of $920,000 from a noncontrolling interest in consolidated entities.

The cash inflows were partially offset by repayments of indebtedness of $62.8 million, $4.9 million of dividend and distribution payments and $930,000 of payments for loan costs and fees.

Dividend Policy.

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.

On June 1, 2022, our board of directors declared a quarterly cash dividend of $0.01 per diluted share for the Company’s common stock for the second 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.

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Net income (loss) $ 16,680 $ (11,364) $ 32,284 (22,398)

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Net income (loss) $ 16,680 $ (11,364) $ 32,284 $ (22,398)

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Amortization of loan costs (1)

553 571 1,195 1,277

Unrealized (gain) loss on derivatives (1,208) 58 (1,616) 78

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Depreciation and amortization on real estate $ (644) $ (679) $ (1,290) $ (1,373)

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(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.

The results of the Hotel are included from March 11, 2022 through June 30, 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