What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-07 compared with 2022-08-05 · 234 added, 189 removed, 1047 unchanged (29% of the section changed)

4 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Investments in hotel properties, gross $ 2,055,773 $ 1,845,078

26 unchanged sentences

Commitments and contingencies (note 15)

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,078,017 shares issued and outstanding at June 30, 2022 and December 31, 2021

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,078,017 shares issued and outstanding at September 30, 2022 and December 31, 2021

65,426 65,426

Series E redeemable preferred stock, $ 0.01 par value, 4,508,088 and 1,710,399 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Series E redeemable preferred stock, $ 0.01 par value, 8,880,432 and 1,710,399 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

204,252 39,339

Series M redeemable preferred stock, $ 0.01 par value, 395,945 and 29,044 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Series M redeemable preferred stock, $ 0.01 par value, 1,066,934 and 29,044 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Redeemable noncontrolling interests in operating partnership 40,635 36,087

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

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 71,310,367 and 65,365,470 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at September 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 71,456,351 and 65,365,470 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 739,394 707,418

9 unchanged sentences

(unaudited, in thousands, except per share amounts)

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

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

2022 2021 2022 2021

20 unchanged sentences

Interest income 745 13 932 34

Other income (expense) 27 — 27 —

Interest expense and amortization of discounts and loan costs ( 14,490 ) ( 8,364 ) ( 33,293 ) ( 22,346 )

21 unchanged sentences

(unaudited, in thousands)

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

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

2022 2021 2022 2021

19 unchanged sentences

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at March 31, 2022 1,600 $ 16 71,270 $ 712 $ 736,911 $ ( 303,323 ) $ ( 16,411 ) $ 417,905 3,078 $ 65,426 3,191 73,404 62 1,538 $ 42,291

Balance at June 30, 2022 1,600 $ 16 71,310 $ 712 $ 738,353 $ ( 290,307 ) $ ( 14,943 ) $ 433,831 3,078 $ 65,426 4,508 $ 103,697 396 $ 9,750 $ 40,291

Purchase of common stock — — ( 156 ) ( 1 ) ( 760 ) — — ( 761 ) — — — — — — —

Equity-based compensation — — — — 1,799 — — 1,799 — — — — — — 1,592

Common stock issuance costs — — — — ( 27 ) — — ( 27 ) — — — — — — —

Issuance of restricted shares/units — — 304 3 2 — — 5 — — — — — — —

16 unchanged sentences

Redemption value adjustment — — — — — ( 2 ) — ( 2 ) — — — — — — 2

Balance at June 30, 2022 1,600 $ 16 71,310 $ 712 $ 738,353 $ ( 290,307 ) $ ( 14,943 ) $ 433,831 3,078 $ 65,426 4,508 $ 103,697 396 $ 9,750 $ 40,291

Balance at September 30, 2022 1,600 $ 16 71,456 $ 714 $ 739,394 $ ( 307,745 ) $ ( 14,120 ) $ 418,259 3,078 $ 65,426 8,880 $ 204,252 1,067 $ 26,274 $ 40,635

8.25 % Series D Cumulative Preferred Stock

31 unchanged sentences

Redemption value adjustment — — — — — 206 — 206 — — — — — — ( 206 )

Balance at June 30, 2022 1,600 $ 16 71,310 $ 712 $ 738,353 $ ( 290,307 ) $ ( 14,943 ) $ 433,831 3,078 $ 65,426 4,508 $ 103,697 396 $ 9,750 $ 40,291

Balance at September 30, 2022 1,600 $ 16 71,456 $ 714 $ 739,394 $ ( 307,745 ) $ ( 14,120 ) $ 418,259 3,078 $ 65,426 8,880 $ 204,252 1,067 $ 26,274 $ 40,635

8.25 % Series D Cumulative Preferred Stock

2 unchanged sentences

Preferred Stock

Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount

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

Series E Redeemable

Preferred Stock Series M Redeemable

Preferred Stock Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

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

Equity-based compensation — — — — 1,990 — — 1,990 — — — — — — 1,054

Issuance of common stock — — 6,550 66 34,166 — — 34,232 — — — — — — —

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

Issuance of common units for hotel acquisitions — — — — — — — — — — — — — — 13,175

Forfeiture of restricted common shares — — ( 7 ) — — — — — — — — — — — —

Issuance of preferred stock — — — — — — — — — — 266 4,204 15 250 —

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

2 unchanged sentences

— — — — — ( 825 ) — ( 825 ) — — — — — — —

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

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

Dividends declared – preferred stock - Series E ($ 0.50 /share)

— — — — — ( 90 ) — ( 90 ) — — — — — — —

Dividends declared – preferred stock - Series M ($ 0.51 /share)

— — — — — ( 4 ) — ( 4 ) — — — — — — —

Net income (loss) — — — — — ( 6,946 ) ( 450 ) ( 7,396 ) — — — — — — ( 823 )

Extinguishment of preferred stock — — 120 — 749 ( 111 ) — 638 ( 30 ) ( 638 ) — — — — —

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

Redemption value adjustment - preferred stock — — — — — ( 2,017 ) — ( 2,017 ) — — — 1,906 — 111 —

Redemption value adjustment — — — — — 2,856 — 2,856 — — — — — — ( 2,856 )

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

Balance at September 30, 2021 1,600 $ 16 63,974 $ 639 $ 698,481 $ ( 303,836 ) $ ( 16,714 ) $ 378,586 3,078 $ 65,426 266 $ 6,110 15 $ 361 $ 39,948

8.25 % Series D Cumulative Preferred Stock

1 unchanged sentence

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

Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount

Series E Redeemable Preferred Stock Series M Redeemable Preferred Stock Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

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

2 unchanged sentences

Issuance of common stock — — 17,714 178 99,631 — — 99,809 — — — — — — —

Issuance of preferred stock — — — — — — — — — — 266 4,204 15 250 —

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

Issuance of common units for hotel acquisitions — — — — — — — — — — — — — — 13,175

Forfeiture of restricted common shares — — ( 22 ) — — — — — — — — — — — —

3 unchanged sentences

— — — — — ( 2,475 ) — ( 2,475 ) — — — — — — —

Dividends declared – preferred stock - Series E ($ 0.50 /share)

— — — — — ( 90 ) — ( 90 ) — — — — — — —

Dividends declared – preferred stock - Series M ($$ 0.51 /share)

— — — — — ( 4 ) — ( 4 ) — — — — — — —

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

3 unchanged sentences

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

Redemption value adjustment - preferred stock — — — — — ( 2,017 ) — ( 2,017 ) — — — 1,906 — 111 —

Redemption value adjustment — — — — — ( 69 ) — ( 69 ) — — — — — — 69

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

Balance at September 30, 2021 1,600 $ 16 63,974 $ 639 $ 698,481 $ ( 303,836 ) $ ( 16,714 ) $ 378,586 3,078 $ 65,426 266 $ 6,110 15 $ 361 $ 39,948

See Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

(unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

10 unchanged sentences

(Gain) loss on insurance settlement and disposition of assets — ( 696 )

Realized and unrealized (gain) loss on derivatives ( 1,616 ) 78

Unrealized (gain) loss on derivatives ( 4,019 ) ( 64 )

Equity in (earnings) loss of unconsolidated entity 220 198

Deferred income tax expense (benefit) — ( 174 )

Changes in operating assets and liabilities, exclusive of the effect of hotel acquisition:

Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions:

Accounts receivable and inventories 443 ( 4,079 )

11 unchanged sentences

Net proceeds from disposition of assets — 1,816

Acquisition of hotel property, net of cash and restricted cash acquired ( 86,798 ) ( 3,000 )

Acquisition of hotel properties, net of cash and restricted cash acquired ( 86,798 ) ( 9,515 )

Investment in unconsolidated entity ( 328 ) ( 117 )

17 unchanged sentences

Cash, cash equivalents and restricted cash at end of period $ 412,810 $ 240,270

Nine Months Ended September 30,

SUPPLEMENTAL CASH FLOW INFORMATION

1 unchanged sentence

Income taxes paid (refunded) 1,209 ( 20 )

Six Months Ended June 30,

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Dividends and distributions declared but not paid $ 4,353 $ 2,112

Common stock purchases accrued but not paid 1 —

Issuance of common units for hotel acquisition — 13,175

Issuance of warrants in hotel acquisition — 1,528

Assumption of debt in hotel acquisition 58,601 49,815

4 unchanged sentences

Non-cash preferred stock dividends 639 —

Non-cash common stock dividends 5 —

SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

15 unchanged sentences

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

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

Terms such as the “Company,” “we,” “us” or “our” refers to Braemar Hotels & Resorts Inc.

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

11 unchanged sentences

These products and services include, but are not limited to, design and construction services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and mobile key technology.

The accompanying condensed consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of June 30, 2022, own 15 hotel properties in six states, the District of Columbia, Puerto Rico and the U.S.

The accompanying condensed consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of September 30, 2022, own 15 hotel properties in six states, the District of Columbia, Puerto Rico and the U.S.

Virgin Islands (“USVI”).

2 unchanged sentences

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

As of June 30, 2022, 14 of our 15 hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Braemar TRS”).

As of September 30, 2022, 14 of our 15 hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Braemar TRS”).

One hotel property, located in the USVI, is owned by our USVI TRS.

1 unchanged sentence

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

As of June 30, 2022, 12 of the 15 hotel properties were leased by Braemar’s wholly-owned TRS, and the two hotel properties majority-owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership.

As of September 30, 2022, 12 of the 15 hotel properties were leased by Braemar’s wholly-owned TRS, and the two hotel properties majority-owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership.

Each leased hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues.

23 unchanged sentences

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

Consequently, operating results for the three and six months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022;

Consequently, operating results for the three and nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022;

• on August 5, 2021, we acquired the Mr.

23 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The impact of adoption on our condensed consolidated statement of operations for the three and six months ended June 30, 2022 resulted in a decrease to net interest expense by $ 273,000 relating to the non-cash interest expense associated with amortization of the debt discount.

The adoption had no effect on our basic and diluted net income per share of common stock attributable to common stockholders for the three and six months ended June 30, 2022.

The impact of adoption on our condensed consolidated statement of operations for the three and nine months ended September 30, 2022 resulted in a decrease to net interest expense by $ 280,000 and $ 826,000 , respectively, relating to the non-cash interest expense associated with amortization of the debt discount.

The adoption had no effect on our basic and diluted net income per share of common stock attributable to common stockholders for the three and nine months ended September 30, 2022.

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

6 unchanged sentences

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

10 unchanged sentences

Total 15 $ 104,503 $ 37,624 $ 19,062 $ 161,189

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

9 unchanged sentences

Total 14 $ 77,560 $ 24,494 $ 14,123 $ 116,177

Six Months Ended June 30, 2022

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Nine Months Ended September 30, 2022

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

10 unchanged sentences

Total 15 $ 322,222 $ 116,600 $ 59,141 $ 497,963

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

11 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Land $ 560,241 $ 480,530

7 unchanged sentences

Impairment Charges and Insurance Recoveries

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

There was no such gain recognized for the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2022 and 2021, no impairment charges were recorded.

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

There was no such gain recognized for the three and nine months ended September 30, 2022.

During the three and nine months ended September 30, 2022 and 2021, no impairment charges were recorded.

The Ritz-Carlton Reserve Dorado Beach

3 unchanged sentences

See note 6 for further discussion regarding the mortgage loan.

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.

We accounted for this acquisition as an asset acquisition because substantially all of the fair value of the gross assets acquired were concentrated in a group of similar identifiable assets.

The cost of the acquisition including transaction costs of approximately $ 1.9 million, was allocated to the individual assets acquired and liabilities assumed on a relative fair value basis, which is considered a Level 3 valuation technique.

On March 14, 2022,

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

We accounted for this acquisition as an asset acquisition because substantially all of the fair value of the gross assets acquired were concentrated in a group of similar identifiable assets.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in the acquisition (in thousands):

8 unchanged sentences

The results of operations of the hotel property have been included in our results of operations from the acquisition date.

The table below summarizes the total revenue and net income (loss) in our condensed consolidated statements of operations for the three and six months ended June 30, 2022:

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

The table below summarizes the total revenue and net income (loss) in our condensed consolidated statements of operations for the three and nine months ended September 30, 2022:

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Total revenue $ 14,311 $ 41,342

4 unchanged sentences

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

On May 26, 2022, the Company made an additional investment in OpenKey of approximately $ 164,000 .

As of June 30, 2022, the Company has made investments in OpenKey totaling $ 2.8 million.

In 2022, the Company made additional investments in OpenKey of approximately $ 328,000 .

As of September 30, 2022, the Company has made investments in OpenKey totaling $ 2.9 million.

Our investment is recorded as “investment in unconsolidated entity” in our condensed consolidated balance sheets and is accounted for under the equity method of accounting as we have significant influence over the entity under the applicable accounting guidance.

2 unchanged sentences

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

No such impairment was recorded for the three and six months ended June 30, 2022 and 2021.

No such impairment was recorded for the three and nine months ended September 30, 2022 and 2021.

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Carrying value of the investment in OpenKey (in thousands) $ 1,797 $ 1,689

Ownership interest in OpenKey 7.9 % 7.8 %

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

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

Line Item 2022 2021 2022 2021

Equity in earnings (loss) of unconsolidated entity $ ( 74 ) $ ( 66 ) $ ( 146 ) $ ( 130 )

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

Line Item 2022 2021 2022 2021

Equity in earnings (loss) of unconsolidated entity $ ( 74 ) $ ( 68 ) $ ( 220 ) $ ( 198 )

Indebtedness, net

1 unchanged sentence

Indebtedness Collateral Current Maturity Final

Interest Rate June 30, 2022 December 31, 2021

Maturity (10)

Interest Rate September 30, 2022 December 31, 2021

Mortgage loan (3)

1 unchanged sentence

Mortgage loan (4)

The Ritz-Carlton St.

Thomas August 2022 August 2024 LIBOR (1) + 3.95 %

42,500 42,500

Mortgage loan (5)

The Ritz-Carlton Sarasota April 2023 April 2023 LIBOR (1) + 2.65 %

12 unchanged sentences

Mortgage loan (6)

The Ritz-Carlton St.

Thomas August 2023 August 2024 LIBOR (1) + 3.95 %

42,500 42,500

Mortgage loan (4)

The Ritz-Carlton Lake Tahoe January 2024 January 2024 LIBOR (1) + 2.10 %

13 unchanged sentences

Pier House Resort & Spa September 2024 September 2024 LIBOR (1) + 1.85 %

80,000 80,000

Mortgage loan (9)

Pier House Resort & Spa September 2024 September 2024 SOFR (2) + 1.95 %

Convertible Senior Notes Equity June 2026 June 2026 4.50 % 86,250 86,250

5 unchanged sentences

__________________

(1) LIBOR rates were 1.787 % and 0.101 % at June 30, 2022 and December 31, 2021, respectively.

(2) SOFR rate was 1.686 % at June 30, 2022.

(1) LIBOR rates were 3.143 % and 0.101 % at September 30, 2022 and December 31, 2021, respectively.

(2) SOFR rate was 3.042 % at September 30, 2022.

(3) On February 2, 2022, we refinanced this mortgage loan totaling $ 67.5 million with a new $ 70.5 million mortgage loan with a two-year initial term and three one-year extension options, subject to the satisfaction of certain conditions.

The new mortgage loan is interest only and bears interest at a rate of SOFR + 2.86 %.

(4) This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in August 2021.

(4) This mortgage loan has a LIBOR floor of 0.25 %.

(5) This mortgage loan has a LIBOR floor of 0.25 %.

(5) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in June 2022.

(6) This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in August 2022.

This mortgage loan has a LIBOR floor of 1.00 %.

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

1 unchanged sentence

(8) This mortgage loan has a LIBOR floor of 1.50 %.

(9) On September 29, 2022, we amended this mortgage loan.

Terms of the agreement replaced the variable interest rate of LIBOR + 1.85 % with SOFR + 1.95 %.

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

During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront, Capital Hilton and Hilton La Jolla Torrey Pines.

As of June 30, 2022, no loans are in default.

The Company determined that all of the forbearance and other agreements evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges.

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

The amount of principal amortization for the three and six months ended June 30, 2022 was $ 500,000 and $ 1.0 million, respectively.

For the three and six months ended June 30, 2021, the amount of principal amortization was approximately $ 1.0 million and $ 2.4 million, respectively.

The Company determined that all of the forbearance and other agreements

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges.

The amount of principal amortization for the three and nine months ended September 30, 2022 was $ 481,000 and $ 1.5 million, respectively.

For the three and nine months ended September 30, 2021, the amount of principal amortization was approximately $ 519,000 and $ 2.9 million, respectively.

On March 11, 2022, in connection with the acquisition of The Ritz-Carlton Reserve Dorado Beach, the Company assumed a $ 54 million mortgage loan.

2 unchanged sentences

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.

The Convertible Senior Notes are governed by an indenture between the Company and U.S.

Bank National Association, as trustee.

1 unchanged sentence

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

The Company recorded coupon interest expense of $ 970,000 and $ 1.9 million for the three and six months ended June 30, 2022, respectively.

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

The Company recorded coupon interest expense of $ 970,000 and $ 2.9 million for the three and nine months ended September 30, 2022, respectively.

The Company also recorded coupon interest expense of $ 970,000 and $ 1.4 million for the three and nine months ended September 30, 2021, respectively.

Upon issuance of the Convertible Senior Notes, the Company separated the Convertible Senior Notes into liability and equity components.

4 unchanged sentences

The initial discount of $ 9.3 million was accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Senior Notes.

The Company recorded discount amortization of $ 139,000 and $ 271,000 related to the initial purchase discount for the three and six months ended June 30, 2022, with the remaining discount balance to be amortized through June 2026.

For the three and six months ended June 30, 2021, the discount amortization was $ 185,000 .

The Company recorded discount amortization of $ 140,000 and $ 411,000 related to the initial purchase discount for the three and nine months ended September 30, 2022, with the remaining discount balance to be amortized through June 2026.

For the three and nine months ended September 30, 2021, the discount amortization was $ 391,000 and $ 576,000 , respectively.

As a result of the Company's adoption of ASU 2020-06 on January 1, 2022, the Convertible Senior Notes are now recorded as a single liability with no portion recorded in equity.

3 unchanged sentences

The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100 % of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.

If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all.

The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group.

As of June 30, 2022, we were in compliance with all covenants.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group.

As of September 30, 2022, we were in compliance with all covenants.

Derivative Instruments

3 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

Interest rate caps:

2 unchanged sentences

Strike rate high end of range 4.00 % 4.00 %

Effective date range February 2022 - May 2022 January 2021 - May 2021

Termination date range May 2023 - February 2024 September 2021 - June 2022

Effective date range February 2022 - September 2022 January 2021 - September 2021

Termination date range May 2023 - February 2024 February 2022 - August 2024

Total cost of interest rate caps (in thousands) $ 2,092 $ 200

3 unchanged sentences

Interest rate caps:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Notional amount (in thousands) $ 940,500 $ 882,500

1 unchanged sentence

Strike rate high end of range 4.00 % 4.00 %

Termination date range August 2022 - August 2024 February 2022 - August 2024

Termination date range October 2022 - August 2024 February 2022 - August 2024

Aggregate principal balance on corresponding mortgage loans (in thousands) $ 859,250 $ 857,000

3 unchanged sentences

C Beverly Hills Hotel and five adjacent luxury residences, the Company issued 500,000 warrants for the purchase of Braemar common stock with a $ 6.00 strike price on or after August 5, 2021 until August 5, 2024.

The holder can choose to exercise the warrant by cash or by net issue exercise, in which event the Company shall issue to the holder a number of warrant shares which reflects the fair market value of the Company’s common stock.

As of June 30, 2022, no warrants have been exercised.

The holder can choose to exercise the warrant by cash or by net issue exercise, in which event the Company shall issue to the holder a number of warrant shares which reflect the fair market value of the Company’s common stock.

As of September 30, 2022, no warrants have been exercised.

The initial fair value of the warrant was calculated using a Black-Scholes option pricing model with the following assumptions:

25 unchanged sentences

Transfers of inputs between levels are determined at the end of each reporting period.

In determining the fair values of our derivatives at June 30, 2022, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 1.787 % to 3.520 % for the remaining term of our derivatives.

In determining the fair values of our derivatives at September 30, 2022, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 3.143 % to 4.595 % for the remaining term of our derivatives.

Credit spreads (Level 3 inputs) used in determining the fair values derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.

5 unchanged sentences

(Level 3) Total

June 30, 2022

September 30, 2022

Derivative assets:

19 unchanged sentences

__________________

(1) Reported as “derivative assets” in our condensed consolidated balance sheet.

(2) Reported as “derivative liabilities” in our condensed consolidated balance sheet.

(1) Reported as “derivative assets” in our condensed consolidated balance sheets.

(2) Reported as “derivative liabilities” in our condensed consolidated balance sheets.

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

1 unchanged sentence

Gain (Loss) Recognized in Income

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

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

2022 2021 2022 2021

1 unchanged sentence

Interest rate derivatives - caps $ 2,138 (1)

$ ( 48 ) $ 3,024 (1)

Total derivative assets $ 2,138 $ ( 48 ) $ 3,024 $ ( 126 )

8 unchanged sentences

Net $ 2,403 $ 142 $ 4,019 $ 64

(1) Excludes income of $ 27,000 for both the three and nine months ended September 30, 2022, associated with payments received from counterparties on interest rate caps, which is included in “other income (expense)” in our condensed consolidated statements of operations.

Summary of Fair Value of Financial Instruments

6 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Value Estimated

35 unchanged sentences

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

We estimated the fair value of the total indebtedness to be approximately 89.0 % to 98.4 % of the carrying value of $ 1.2 billion at June 30, 2022, and approximately 87.2 % to 96.4 % of the carrying value of $ 1.2 billion at December 31, 2021.

We estimated the fair value of the total indebtedness to be approximately 91.0 % to 100.6 % of the carrying value of $ 1.2 billion at September 30, 2022, and approximately 87.2 % to 96.4 % of the carrying value of $ 1.2 billion at December 31, 2021.

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

4 unchanged sentences

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):

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

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

2022 2021 2022 2021

10 unchanged sentences

Dividends on common stock 710 — 2,124 —

Distributed and undistributed net income (loss) - basic $ 10,120 $ ( 15,537 ) $ 21,268 $ ( 26,706 )

Interest expense on Convertible Senior Notes 1,108 — 2,211 —

Dividends on preferred stock - Series E 2,053 — 3,452 —

Dividends on preferred stock - Series M $ 128 $ — $ 149 $ —

Distributed and undistributed net income (loss) - diluted $ 13,409 $ ( 15,537 ) $ 27,080 $ ( 26,706 )

Distributed and undistributed net income (loss) - basic and diluted $ ( 14,077 ) $ ( 9,034 ) $ 7,467 $ ( 35,740 )

Weighted average common shares outstanding:

1 unchanged sentence

Effect of assumed exercise of warrants — — 1 —

Effect of assumed conversion of Convertible Senior Notes 13,610 — 13,610 —

Effect of assumed conversion of preferred stock - Series E 22,207 — 16,232 —

Effect of assumed conversion of preferred stock - Series M 1,112 — 630 —

Weighted average common shares outstanding – diluted 70,956 59,207 69,214 48,954

7 unchanged sentences

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):

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

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

2022 2021 2022 2021

6 unchanged sentences

Interest expense on Convertible Senior Notes 1,111 1,361 3,322 2,010

Dividends on preferred stock - Series E 3,697 90 7,149 90

Dividends on preferred stock - Series M 447 4 596 4

Total $ 5,157 $ 1,801 $ 15,016 $ 7,204

1 unchanged sentence

Effect of unvested restricted shares 47 89 33 100

Effect of unvested performance stock units — — 1 —

Effect of assumed conversion of operating partnership units 5,956 5,564 5,893 4,543

2 unchanged sentences

Effect of assumed conversion of Convertible Senior Notes 13,609 13,609 13,609 6,730

Effect of assumed conversion of preferred stock - Series E 41,008 700 24,491 233

Effect of assumed conversion of preferred stock - Series M 4,563 32 1,941 11

Total 69,299 24,109 50,083 16,883

13 unchanged sentences

The award agreements provide for the grant of a target number of Performance LTIP units that will be settled in common units of Braemar OP, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date.

As of June 30, 2022, there were approximately 2.2 million Performance LTIP units, representing 200 % of the target, outstanding.

With respect to the 2020 award agreements, the number of Performance LTIP units actually earned may range from 0 % to 200 % of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date.

The performance criteria for the Performance LTIP units are based on

As of September 30, 2022, there were approximately 2.1 million Performance LTIP units, representing 200 % of the target, outstanding.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

market conditions under the relevant literature.

The performance criteria for the Performance LTIP units are based on market conditions under the relevant literature.

The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.

4 unchanged sentences

In March 2022, the Company granted approximately 1.2 million Performance LTIP units, representing 200 % of the target, with an initial grant date fair value of $ 5.89 per share and a vesting period of three years .

During the second quarter, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements as of June 30, 2022.

During the second quarter of 2022, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements .

The 2022 awards, which were originally classified as liability awards, are now classified as equity awards, within temporary equity, which resulted in a remeasurement of the award at a new fair value of $ 5.63 per share.

On May 11, 2022, approximately 45,000 LTIP units were issued to independent directors, with a fair value of approximately $ 252,000 , which vested immediately upon grant.

As of June 30, 2022, we have issued a total of approximately 3.6 million LTIP and Performance LTIP units, net of Performance LTIP cancellations.

On May 11, 2022, approximately 45,000 LTIP units were issued to our independent directors, with a fair value of approximately $ 252,000 , which vested immediately upon grant.

As of September 30, 2022, we have issued a total of approximately 3.5 million LTIP and Performance LTIP units, net of Performance LTIP cancellations.

All LTIP and Performance LTIP units, other than approximately 569,000 LTIP units and 840,000 Performance LTIP units issued from March 2015 to May 2021, had reached full economic parity with, and are convertible into, common units.

The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding approximate ownership percentage of our operating partnership:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Redeemable noncontrolling interests in Braemar OP $ 40,635 $ 36,087

4 unchanged sentences

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

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

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

2022 2021 2022 2021

2 unchanged sentences

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

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

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

2022 2021 2022 2021

6 unchanged sentences

Common Stock Dividends —The following table summarizes the common stock dividends declared during the period (in thousands):

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

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

2022 2021 2022 2021

2 unchanged sentences

We also issue common stock to certain of our independent directors, which vests immediately upon issuance.

In May 2022, approximately 45,000 shares of common stock were issued to independent directors with a fair value of approximately $ 252,000 , which vested immediately upon grant and have been expensed during the three and six months ended June 30, 2022 .

In May 2022, approximately 45,000 shares of common stock were issued to our independent directors with a fair value of approximately $ 252,000 , which vested immediately upon grant and have been expensed during the nine months ended September 30, 2022 .

Performance Stock Units —The compensation committee of the board of directors of the Company may authorize the issuance of grants of performance stock units (“PSUs”) to certain executive officers and directors from time to time.

2 unchanged sentences

The 2022 awards may be settled in cash or shares of the Company’s common stock solely at the option of the Company.

During the second quarter, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements as of June 30, 2022.

During the second quarter, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements .

The 2022 awards, which were originally classified as liability awards, are now classified as equity awards, which resulted in a remeasurement of the award at a new fair value of $ 229,000 .

4 unchanged sentences

The following table summarizes dividends declared (in thousands):

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

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

2022 2021 2022 2021

2 unchanged sentences

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

No shares were repurchased during the six months ended June 30, 2022 and 2021.

As of June 30, 2022, $ 50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.

No shares were repurchased during the nine months ended September 30, 2022 and 2021.

As of September 30, 2022, $ 50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.

Standby Equity Distribution Agreement —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

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

(i) the first day of the month next following the 36 -month anniversary of the SEDA;

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”).

10 unchanged sentences

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 June 30, 2022, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $ 10.0 million under the SEDA.

As of September 30, 2022, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $ 10.0 million under the SEDA.

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

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

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

2022 2021 2022 2021

3 unchanged sentences

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 June 30, 2022, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $ 4.2 million under the Lincoln Park Purchase Agreement.

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

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

As of September 30, 2022, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $ 4.2 million under the Lincoln Park Purchase Agreement.

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

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

2022 2021 2022 2021

3 unchanged sentences

Proceeds received $ — $ — $ — $ 4,217

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

1 unchanged sentence

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 June 30, 2022, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $ 24.0 million.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of September 30, 2022, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $ 24.0 million.

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

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

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

2022 2021 2022 2021

Common shares issued — 4,183 — 4,183

19 unchanged sentences

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

Series B Convertible Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside our control.

As such, the Series B Convertible Preferred Stock is classified outside of permanent equity.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As such, the Series B Convertible Preferred Stock is classified outside of permanent equity.

The following table summarizes dividends declared (in thousands):

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

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

2022 2021 2022 2021

2 unchanged sentences

The table below summarizes the activity (in thousands):

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

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

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

1 unchanged sentence

30 120 1,953 7,291

There were no preferred stock exchanges for the three and six months ended June 30, 2022.

There were no preferred stock exchanges for the three and nine months ended September 30, 2022.

Series E Redeemable Preferred Stock

21 unchanged sentences

• 7.5 % per annum of the Stated Value beginning on the second anniversary from the Date of Initial Closing.

Dividends will be authorized and declared on a monthly basis and payable in arrears on the 15th of each month to holders of record at the close of business on the last business day of each month immediately preceding the applicable thereafter dividend payment date.

Dividends will be authorized and declared on a monthly basis and payable in arrears on the 15th day of each month to holders of record at the close of business on the last business day of each month immediately preceding the applicable thereafter dividend payment date.

Dividends will be computed on the basis of twelve 30-day months and a 360-day year.

1 unchanged sentence

The issuance activity of the Series E Preferred Stock is summarized below (in thousands):

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

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

2022 2021 2022 2021

Series E Preferred Stock shares issued (1)

4,362 266 7,151 266

Net proceeds $ 98,140 $ 5,976 $ 160,894 $ 5,976

6 unchanged sentences

The redemption value adjustment of Series E Preferred Stock is summarized below (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Series E Preferred Stock $ 204,252 $ 39,339

3 unchanged sentences

The following table summarizes dividends declared (in thousands):

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

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

2022 2021 2022 2021

Series E Preferred Stock $ 3,697 $ 90 $ 7,149 $ 90

During the three months ended June 30, 2022, the Company, upon the death of a holder, redeemed 2,000 shares of Series E Preferred Stock for $ 50,000 in cash.

The redemption activities of Series E Preferred Stock is summarized below (in thousands):

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Series E Preferred Stock shares redeemed 3 5

Redemption amount, net of redemption fees $ 84 $ 134

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Series M Redeemable Preferred Stock

2 unchanged sentences

The Company is also offering a maximum of 8,000,000 shares of Series M Preferred Stock pursuant to the DRIP at $ 25.00 per share.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Series M Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.

1 unchanged sentence

If and whenever dividends on any shares of Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive the number of directors then constituting the board shall be increased by two and the holders of such shares of Series M Preferred Stock shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

Each share is redeemable at any time, at the option of the holder, at a redemption price of $ 25.00 per share, plus any accumulated, accrued, and unpaid dividends, less a redemption fee.

Starting on the second anniversary, each share is redeemable at any time, at the option of the Company, at a redemption price of $ 25.00 per share, plus any accumulated, accrued, and unpaid dividends (with no redemption fee).

The Series M Preferred Stock is also subject to conversion upon certain events constituting a change of control.

Upon such change of control events, holders have the option to convert their shares of Series M Preferred Stock into a maximum of 5.69476 shares of our common stock.

The redemption fee shall be an amount equal to:

1 unchanged sentence

• 0 % of the Stated Value beginning on the first anniversary from the Series M Original Issue Date of the shares of Series M Preferred Stock to be redeemed.

The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption.

The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal number of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption.

Holders of Series M Preferred Stock are entitled to receive cumulative cash dividends at the initial rate of 8.2 % per annum of the Stated Value of $ 25.00 per share (equivalent to an annual dividend rate of $ 2.05 per share).

1 unchanged sentence

provided, however, that the dividend rate for any share of Series M Preferred Stock shall not exceed 8.7 % per annum of the Stated Value.

Dividends will be computed on the basis of twelve 30-day months and a 360-day year.

The Company has a DRIP that allows for participating holders to have their Series M Preferred Stock dividend distributions automatically reinvested in additional shares of the Series M Preferred Stock at a price of $ 25.00 per share.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The issuance activity of Series M Preferred Stock is summarized below (in thousands):

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

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

2022 2021 2022 2021

Series M Preferred Stock shares issued (1)

673 15 1,040 15

Net proceeds $ 16,311 $ 355 $ 25,208 $ 355

5 unchanged sentences

As a result of the Company’s determination that redemption is probable the carrying value will be adjusted to the redemption amount each reporting period.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The redemption value adjustment of Series M Preferred stock is summarized below (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Series M Preferred Stock $ 26,274 $ 715

Adjustments to Series M Preferred Stock (1)

__________________

(1) Reflects the excess of the redemption value over the accumulated carrying value.

The following table summarizes dividends declared (in thousands):

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

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

2022 2021 2022 2021

Series M Preferred Stock $ 447 $ 4 $ 596 $ 4

The redemption activities of Series M Preferred Stock is summarized below (in thousands):

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Series M Preferred Stock shares redeemed 2 2

Redemption amount, net of redemption fees $ 59 $ 59

Related Party Transactions

10 unchanged sentences

▪ 1/12 th of the G&A Ratio (as defined) multiplied by the total market capitalization of Braemar.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We are also required to pay Ashford LLC an incentive fee that is measured annually (or for a stub period if the advisory agreement is terminated at other than year-end).

2 unchanged sentences

We also recorded equity-based compensation expense for equity grants of common stock and LTIP units awarded to officers and employees of Ashford LLC in connection with providing advisory services.

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.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

2022 2021 2022 2021

11 unchanged sentences

Under the advisory agreement, Ashford Inc.

secures casualty insurance policies to cover Braemar, Ashford Trust, their hotel managers, as needed, and Ashford Inc.

secures casualty insurance policies to cover Braemar, Ashford Hospitality Trust, Inc.

(“Ashford Trust”), their hotel managers, as needed, and Ashford Inc.

The total loss estimates included in such policies are based on the collective pool of risk exposures from each party.

1 unchanged sentence

Each year Ashford Inc.'s risk management department collects funds from Braemar, Ashford Trust and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.

As of June 30, 2022 and December 31, 2021, due from related parties, net included a $ 365,000 security deposit paid to Remington Hotel Corporation, an entity indirectly owned by Mr.

As of September 30, 2022 and December 31, 2021, due from related parties, net included a $ 365,000 security deposit paid to Remington Hotel Corporation, an entity indirectly owned by Mr.

Bennett and Mr.

8 unchanged sentences

Beginning on the effective date of the Amended and Restated Contribution Agreement, costs will be allocated based upon an allocation percentage of 50 % to Ashford Inc., 50 % to Braemar and 0 % to Ashford Trust.

Upon reaching the earlier of $ 400 million in aggregate non-listed preferred equity offerings raised, or June 10, 2023, there will be an amended and restated true up (the “Amended and Restated True-Up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual expense reimbursement paid by each company will be based on the actual amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively, through Ashford Securities.

Upon reaching the earlier of $ 400 million in aggregate capital raised, or June 10, 2023, there will be an amended and restated true up (the “Amended and Restated True-Up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual expense reimbursement paid by each company will be based on the actual amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively, through Ashford Securities.

After the Amended and Restated True-Up Date, the expense reimbursements will be allocated among Ashford Inc., Ashford Trust and Braemar quarterly based on the actual capital raised through Ashford Securities.

1 unchanged sentence

entered into a Second Amended and Restated Contribution Agreement which provided for an additional $ 18 million in expenses to be reimbursed with all expenses allocated 45 % to Ashford Trust, 45 % to Braemar and 10 % to Ashford Inc.

As of June 30, 2022, Braemar has funded approximately $ 4.9 million.

Additionally, as of June 30, 2022 and December 31, 2021 , $ 143,000 and $ 338,000 , respectively, of the pre-funded amounts were included in “other assets” on our condensed consolidated balance sheets.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of September 30, 2022, Braemar has funded approximately $ 4.9 million.

During the third quarter of 2022, the funding estimate was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities.

This resulted in additional expense of approximately $ 5.2 million.

As of September 30, 2022 there was a payable of approximately $ 4.5 million that is included in “due to Ashford Inc., net” on the condensed consolidated balance sheet.

As of December 31, 2021, $ 338,000 of the pre-funded amount was included in “other assets” on the condensed consolidated balance sheet.

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

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

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

Line Item 2022 2021 2022 2021

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or any of its subsidiaries.

The independent members of our board of directors and the independent members of the board of directors of Ashford Inc., with the assistance of separate and independent legal counsel, engaged to negotiate the ERFP Agreement on behalf of Ashford Inc.

and Braemar, respectively.

The ERFP Agreement generally provides that Ashford LLC will provide funding to facilitate the acquisition of properties by Braemar OP that are recommended by Ashford LLC, in an aggregate amount of up to $ 50 million (subject to increase to up to $ 100 million by mutual agreement).

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At the end of the Initial Term, the ERFP Agreement automatically renewed for one year and shall automatically renew for successive one-year periods (each such period a “Renewal Term”) unless either Ashford Inc.

or Braemar provides written notice to the other at least sixty days in advance of the expiration of the Initial Term or Renewal Term, as applicable, that such notifying party intends not to renew the ERFP Agreement.

or Braemar provides written notice to the other at least 60 days in advance of the expiration of the Initial Term or Renewal Term, as applicable, that such notifying party intends not to renew the ERFP Agreement.

On November 8, 2021, the Company received written notice from the Advisor of its intention not to renew the ERFP program.

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Hotel Management Services

At June 30, 2022, Remington Hotels managed four of our 15 hotel properties.

We pay monthly hotel management fees equal to the greater of approximately $ 15,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues as well as annual incentive management fees, if certain operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

Pursuant to the terms of the Letter Agreement dated March 13, 2020 (the “Hotel Management Letter Agreement”), in order to allow Remington Hotels to better manage its corporate working capital and to ensure the continued efficient operation of our hotels, we agreed to pay the base fee and to reimburse all expenses on a weekly basis for the preceding week, rather than on a

At September 30, 2022, Remington Hotels managed four of our 15 hotel properties.

We pay monthly hotel management fees equal to the greater of approximately $ 16,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues as well as annual incentive management fees, if certain

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

monthly basis.

operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

The Hotel Management Letter Agreement went into effect on March 13, 2020 and will continue until terminated by us.

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In January 2022, the City of San Francisco remitted payment to Ashford Trust, which subsequently remitted payment to Braemar.

During the second quarter of 2022 the Company received an additional payment of approximately $ 114,000 related to accrued interest on the initial settlement amount, which is included in “(gain) loss on legal settlements” on the condensed consolidated statements of operations for the three and six months ended June 30, 2022.

Commitments and Contingencies

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at June 30, 2022, escrow payments are required for insurance, real estate taxes and debt service.

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at September 30, 2022, escrow payments are required for insurance, real estate taxes and debt service.

In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4 % to 5 % of gross revenues for capital improvements.

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and (iii) 25 % of food and beverage profits.

The agreement expires on August 5, 2022 and we intend to renew it for a one year term.

The agreement expires on August 5, 2023.

The table below summarizes the licensing fees incurred (in thousands):

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

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

Line Item 2022 2021 2022 2021

Other hotel expenses $ 76 $ 53 $ 367 $ 53

Management Fees —Under hotel management agreements for our hotel properties existing at June 30, 2022, we pay a monthly hotel management fee equal to the greater of approximately $ 15,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, or in some cases 3.0 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

Management Fees —Under hotel management agreements for our hotel properties existing at September 30, 2022, we pay a monthly hotel management fee equal to the greater of approximately $ 16,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, or in some cases 3.0 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

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

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Tax years 2017 through 2021 remain subject to potential examination by certain federal and state taxing authorities.

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

On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York County, seeking a declaratory judgment that no breach under the Accor management agreement has occurred and an injunction to prevent Ashford TRS Chicago II from terminating the Accor management agreement.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

complaint was dismissed on or about February 27, 2020.

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

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

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

As a result of the settlement related to the 2018 performance test failure, the Company recorded a gain of approximately $ 868,000 for the three months ended March 31, 2022, that is recorded as a reduction of management fees and included in “management fees” on the Company’s condensed consolidated statements of operations.

Arbitration occurred on October 12-13, 2022 and the arbitrator’s deadline for delivering a decision is December 9, 2022.

As a result of the settlement related to the 2018 performance test failure, the Company recorded a gain of approximately $ 868,000 during the first quarter of 2022, that is recorded as a reduction of management fees and included in “management fees” on the Company’s condensed consolidated statements of operations.

On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company.

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While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe any potential loss to the Company is reasonably estimable at this time.

As of June 30, 2022, no amounts have been accrued.

As of September 30, 2022, no amounts have been accrued.

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

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We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics and exhibit similar long-term financial performance.

As of June 30, 2022 and December 31, 2021, all of our hotel properties were in the U.S.

As of September 30, 2022 and December 31, 2021, all of our hotel properties were in the U.S.

and its territories.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Subsequent Events

From July 1, 2022 through August 3, 2022, the Company issued approximately 2.0 million shares of Series E Preferred Stock and received net proceeds of approximately $ 44.1 million and issued approximately 270,000 shares of Series M Preferred Stock and received net proceeds of approximately $ 6.5 million.

Subsequent to September 30, 2022, the Company issued approximately 1.4 million shares of Series E Preferred Stock and received net proceeds of approximately $ 32.5 million and issued approximately 171,000 shares of Series M Preferred Stock and received net proceeds of approximately $ 4.1 million.

On October 31, 2022, the Company entered into a Purchase and Sale Agreement (the “ Purchase Agreement ”) to acquire a 100 % interest in the 210 -room Four Seasons Resort Scottsdale at Troon North for $ 267.8 million in cash.

As required by the Purchase Agreement, the Company has deposited $ 26.8 million into escrow pending the closing or termination of the Purchase Agreement.

The acquisition is expected to close by December 31, 2022, subject to certain customary closing conditions.

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

What changed 10-Q

Item 1. Financial Statements