What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-08 compared with 2022-11-07 · 292 added, 518 removed, 763 unchanged (51% of the section changed)

4 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Investments in hotel properties, gross $ 2,335,545 $ 2,325,093

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 September 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 March 31, 2023 and December 31, 2022

65,426 65,426

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

Series E redeemable preferred stock, $ 0.01 par value, 16,474,156 and 12,656,529 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

378,906 291,076

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

Series M redeemable preferred stock, $ 0.01 par value, 1,960,267 and 1,428,332 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

48,294 35,182

Redeemable noncontrolling interests in operating partnership 34,820 40,555

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 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

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

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 65,949,691 and 69,919,065 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 715,729 734,134

9 unchanged sentences

(unaudited, in thousands, except per share amounts)

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

2022 2021 2022 2021

Three Months Ended March 31,

Rooms $ 137,527 $ 105,192

11 unchanged sentences

Advisory services fee 7,948 7,322

(Gain) loss on legal settlements — — ( 114 ) ( 989 )

Transaction costs — 275 — 571

Corporate general and administrative 2,820 2,495

Total expenses 158,080 115,127 441,638 303,276

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

Total operating expenses 177,502 135,428

OPERATING INCOME (LOSS) 37,799 26,452

1 unchanged sentence

Interest income 2,108 25

Other income (expense) 27 — 27 —

Interest expense and amortization of discounts and loan costs ( 22,873 ) ( 8,522 )

Write-off of loan costs and exit fees ( 12 ) ( 76 )

Unrealized gain (loss) on derivatives 2,403 142 4,019 64

Gain (loss) on extinguishment of debt 2,318 —

Realized and unrealized gain (loss) on derivatives ( 334 ) 408

INCOME (LOSS) BEFORE INCOME TAXES 18,933 18,215

5 unchanged sentences

Preferred dividends ( 10,350 ) ( 3,303 )

Gain (loss) on extinguishment of preferred stock — ( 111 ) — ( 4,595 )

Deemed dividends on preferred stock ( 2,454 ) —

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 3,230 $ 11,360

10 unchanged sentences

(unaudited, in thousands)

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

2022 2021 2022 2021

Three Months Ended March 31,

NET INCOME (LOSS) $ 16,604 $ 15,604

18 unchanged sentences

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

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

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

Forfeiture of restricted common shares — — ( 2 ) — — — — — — — — — — — —

Issuance of preferred stock — — — — — — — — — — 4,375 98,277 673 16,296 —

Dividends declared – common stock ($ 0.01 /share)

— — — — — ( 719 ) — ( 719 ) — — — — — — —

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

— — — — — ( 1,059 ) — ( 1,059 ) — — — — — — —

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

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

Dividends declared – preferred stock - Series E ($ 0.48 /share)

— — — — — ( 3,697 ) — ( 3,697 ) — — — — — — —

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

— — — — — ( 447 ) — ( 447 ) — — — — — — —

Distributions to noncontrolling interests — — — — — — — — — — — — — — ( 84 )

Net income (loss) — — — — — ( 8,040 ) 823 ( 7,217 ) — — — — — — ( 1,166 )

Redemptions of preferred stock — — — — — — — — — — ( 3 ) ( 84 ) ( 2 ) ( 59 ) —

Redemption value adjustment - preferred stock — — — — — ( 2,649 ) — ( 2,649 ) — — — 2,362 — 287 —

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

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

Common Stock Additional

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

Preferred Stock

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, 2022 1,600 $ 16 69,919 $ 699 $ 734,134 $ ( 324,740 ) $ ( 16,346 ) $ 393,763 3,078 $ 65,426 12,657 $ 291,076 1,428 $ 35,182 $ 40,555

Impact of adoption of new accounting standard — — — — ( 6,257 ) 656 — ( 5,601 ) — — — — — — —

Purchase of common stock — — ( 3,968 ) ( 40 ) ( 19,210 ) — — ( 19,250 ) — — — — — — —

Equity-based compensation — — — — 805 — — 805 — — — — — — 1,408

Issuance of common stock — — 6,000 60 34,981 — — 35,041 — — — — — — —

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

Issuance of preferred stock — — — — — — — — — — 3,828 85,916 533 12,879 —

Issuance of restricted shares/units — — 349 3 2 — — 5 — — — — — — —

Forfeiture of restricted common shares — — ( 1 ) — — — — — — — — — — — —

11 unchanged sentences

Distributions to noncontrolling interests — — — — — — — — — — — — — — ( 361 )

Redemption/conversion of operating partnership units — — — — — — — — — — — — — — ( 7,039 )

Net income (loss) — — — — — 16,034 309 16,343 — — — — — — 261

2 unchanged sentences

Redemption value adjustment — — — — — 4 — 4 — — — — — — ( 4 )

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

Common Stock Additional

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

Preferred Stock

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 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)

— — — — — ( 1,058 ) — ( 1,058 ) — — — — — — —

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

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

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 ) — — — — —

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

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

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

Balance at March 31, 2023 1,600 $ 16 65,950 $ 659 $ 715,729 $ ( 324,840 ) $ ( 14,013 ) $ 377,551 3,078 $ 65,426 16,474 $ 378,906 1,960 $ 48,294 $ 34,820

8.25 % Series D Cumulative Preferred Stock

4 unchanged sentences

Balance at December 31, 2021 1,600 $ 16 65,365 $ 653 $ 707,418 $ ( 309,240 ) $ ( 16,549 ) $ 382,298 3,078 $ 65,426 1,710 $ 39,339 29 $ 715 $ 36,087

Impact of adoption of new accounting standard — — — — ( 6,257 ) 656 — ( 5,601 ) — — — — — — —

Purchase of common stock — — ( 93 ) ( 1 ) ( 551 ) — — ( 552 ) — — — — — — —

2 unchanged sentences

Issuance of preferred stock — — — — — — — — — — 1,481 33,093 33 802 —

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

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

Forfeiture of restricted common shares — — ( 2 ) — — — — — — — — — — — —

Dividends declared - common stock - ($ 0.01 /share)

— — — — ( 720 ) — ( 720 ) — — — — — — —

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

6 unchanged sentences

— — — — — ( 21 ) — ( 21 ) — — — — — — —

Distributions to noncontrolling interests — — — — — — — — — — — — — — ( 83 )

Contributions from noncontrolling interests — — — — — — 164 164 — — — — — — —

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

Net income (loss) — — — — — 14,663 ( 26 ) 14,637 — — — — — — 967

Extinguishment of preferred stock — — 7,291 71 46,047 ( 4,595 ) — 41,523 ( 1,953 ) ( 41,523 ) — — — —

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

Redemption value adjustment - preferred stock — — — — — ( 993 ) — ( 993 ) — — — 972 — 21 —

Redemption value adjustment — — — — — ( 4,386 ) — ( 4,386 ) — — — — — — 4,386

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

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

See Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

(unaudited, in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Bad debt expense 188 269

(Gain) loss on extinguishment of debt ( 2,318 ) —

Amortization of loan costs, discounts and capitalized default interest 447 109

3 unchanged sentences

Interest expense accretion on refundable membership club deposits 178 190

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

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

Realized and unrealized (gain) loss on derivatives 334 ( 408 )

Equity in (earnings) loss of unconsolidated entity 73 72

8 unchanged sentences

Due to/from Ashford Inc.

( 7,314 ) 1,703

Operating lease liabilities ( 72 ) ( 73 )

3 unchanged sentences

Proceeds from property insurance 75 —

Net proceeds from disposition of assets — 1,816

Acquisition of hotel properties, net of cash and restricted cash acquired — ( 86,958 )

7 unchanged sentences

Payments for derivatives ( 755 ) ( 76 )

Proceeds from derivatives 1,601 —

Purchase of common stock ( 18,952 ) —

2 unchanged sentences

Proceeds from issuance of common stock — ( 36 )

Common stock offering costs ( 102 ) —

Contributions from noncontrolling interest in consolidated entities 2,024 164

Redemption of operating partnership units ( 7,039 ) —

Distributions to noncontrolling interest in consolidated entities ( 2,024 ) —

Redemption of preferred stock ( 307 ) —

3 unchanged sentences

Cash, cash equivalents and restricted cash at end of period $ 344,553 $ 226,338

Nine Months Ended September 30,

Three Months Ended March 31,

SUPPLEMENTAL CASH FLOW INFORMATION

4 unchanged sentences

Common stock purchases accrued but not paid 352 552

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

4 unchanged sentences

Non-cash preferred stock dividends 843 99

Non-cash common stock dividends 5 —

Unsettled proceeds from derivatives 596 —

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”).

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

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

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

10 unchanged sentences

has an ownership interest.

These products and services include, but are not limited to, 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 September 30, 2022, own 15 hotel properties in six states, the District of Columbia, Puerto Rico and the U.S.

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

The accompanying condensed consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of March 31, 2023, own 16 hotel properties in seven 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 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”).

As of March 31, 2023, 15 of our 16 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 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.

As of March 31, 2023, 13 of the 16 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.

2 unchanged sentences

(“Marriott”), Hilton Management LLC (“Hilton”), Accor Management US Inc.

(“Accor”), Hyatt Corporation (“Hyatt”), The Ritz-Carlton Hotel Company, L.L.C.

(“Accor”), Four Seasons Hotels Limited (“Four Seasons”), Hyatt Corporation (“Hyatt”), The Ritz-Carlton Hotel Company, L.L.C.

and its affiliates, each of which is also an affiliate of Marriott (“Ritz-Carlton”) and Remington Hotels, which are eligible independent contractors under the Code.

5 unchanged sentences

All intercompany accounts and transactions between consolidated entities have been eliminated in these condensed consolidated financial statements.

We have condensed

We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements.

GAAP in the accompanying unaudited condensed consolidated financial statements.

We believe the disclosures made herein are adequate to prevent the information presented from being misleading.

However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2021 Annual Report on Form 10-K, as originally filed with the Securities and Exchange Commission (“SEC”) on March 10, 2022.

However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 10, 2023.

Braemar OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance.

4 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 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.

C Beverly Hills Hotel and five adjacent luxury residences.

The operating results of the hotel property have been included in the results of operations from its acquisition date;

Consequently, operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023;

• on March 11, 2022, we acquired The Ritz-Carlton Reserve Dorado Beach hotel located in Dorado, Puerto Rico.

The operating results of the hotel property have been included in the results of operations from its acquisition date;

• on December 1, 2022, we acquired the Four Seasons Resort Scottsdale at Troon North located in Scottsdale, Arizona.

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

Use of Estimates —The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Recently Adopted Accounting Standards —In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

(1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in Accounting Standards Codification (“ASC”) 470-20, Debt:

Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock;

(2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification;

and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

For SEC filers, excluding smaller reporting companies, this ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period.

We adopted ASU 2020-06 through the modified retrospective method on January 1, 2022.

Upon adoption, our Convertible Senior Notes are recorded as a single debt instrument at amortized cost, instead of being recorded as both a liability and equity.

The Company ceased recording non-cash interest expense associated with amortization of the debt discount associated with the conversion features.

The adoption of ASU 2020-06 resulted in an adjustment to additional paid-in capital, accumulated deficit, and the carrying value of our Convertible Senior Notes.

The impact of adopting ASU 2020-06 includes an increase to “indebtedness, net” and a decrease to stockholders’ equity of approximately $ 5.6 million.

The adoption of this standard did not have a material impact on our consolidated financial statements, beyond the impact to our Convertible Senior Notes described above.

Recently Adopted Accounting Standards —In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848 ) (“ASU 2020-04”), which provides optional guidance through December 31, 2022 to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting.

In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848), which further clarified the scope of the reference rate reform optional practical expedients and exceptions outlined in Topic 848.

The amendments in ASU Nos.

2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge effectiveness in hedging relationships that have been modified to replace a reference rate.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848 ) (“ASU 2022-06”), which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

The Company applied the optional expedient in evaluating debt modifications converting from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”).

The Company adopted the standards upon the respective effective dates.

There was no material impact as a result of this adoption.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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”).

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope (“ASU 2021-01”) to provide guidance and relief for transitioning to alternative reference rates.

ASU 2021-01 is effective immediately for all entities.

The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.

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

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

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

1 unchanged sentence

Puerto Rico 1 15,430 4,875 3,137 23,442

Colorado 1 4,214 4,572 2,134 10,920

Florida 2 13,480 5,723 5,368 24,571

Illinois 1 8,165 2,371 493 11,029

Pennsylvania 1 6,023 1,026 373 7,422

Washington 1 8,239 1,223 385 9,847

Washington, D.C.

1 7,745 3,327 533 11,605

USVI 1 10,620 3,678 2,322 16,620

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

Three Months Ended September 30, 2021

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

California 6 $ 28,838 $ 8,024 $ 3,626 $ 40,488

Arizona 1 14,157 6,518 2,616 23,291

Colorado 1 14,341 6,361 2,983 23,685

7 unchanged sentences

Total 16 $ 137,527 $ 52,228 $ 25,546 $ 215,301

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2022

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

10 unchanged sentences

Total 15 $ 105,192 $ 36,707 $ 19,981 $ 161,880

Nine Months Ended September 30, 2021

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

California 6 $ 60,935 $ 17,942 $ 8,607 $ 87,484

Colorado 1 12,058 8,344 6,058 26,460

Florida 2 47,964 18,732 15,311 82,007

Illinois 1 9,607 2,020 792 12,419

Pennsylvania 1 7,568 706 490 8,764

Washington 1 10,980 1,041 1,046 13,067

Washington, D.C.

1 5,711 767 832 7,310

USVI 1 40,897 11,424 7,303 59,624

Total 14 $ 195,720 $ 60,976 $ 40,439 $ 297,135

Investments in Hotel Properties, net

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Land $ 630,842 $ 630,489

6 unchanged sentences

Investments in hotel properties, net $ 1,880,266 $ 1,884,601

Impairment Charges and Insurance Recoveries

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

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

The total consideration consisted of $ 104.0 million of cash and 6.0 million shares of the Company’s 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.

See note 6 for further discussion regarding the mortgage loan.

On March 14, 2022,

Impairment Charges

During the three months ended March 31, 2023 and 2022, no impairment charges were recorded.

Investment in Unconsolidated Entity

OpenKey, Inc.

(“OpenKey”), which is controlled and consolidated by Ashford Inc., is a hospitality-focused mobile key platform that provides a universal smart phone app and related hardware and software for keyless entry into hotel guest rooms.

As of March 31, 2023, the Company has made equity investments in OpenKey totaling $ 2.9 million.

All investments were

BRAEMAR HOTELS & RESORTS INC.

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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 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.

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

Land $ 79,711

Buildings and improvements 102,105

Furniture, fixtures and equipment 15,405

Investments in hotel properties 197,221

Restricted cash 1,091

Inventories 1,184

Mortgage loan ( 58,601 )

Net other assets (liabilities) $ ( 9,966 )

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 nine months ended September 30, 2022:

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

Total revenue $ 14,311 $ 41,342

Net income (loss) 1,197 7,707

Investment in Unconsolidated Entity

OpenKey is a hospitality-focused mobile key platform that provides a universal smart phone app and related hardware and software for keyless entry into hotel guest rooms.

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

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

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.

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

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.

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

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

No such impairment was recorded for the three months ended March 31, 2023 and 2022.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Carrying value of the investment in OpenKey (in thousands) $ 1,615 $ 1,689

Ownership interest in OpenKey 7.9 % 7.9 %

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

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,

Three Months Ended March 31,

Line Item 2023 2022

Equity in earnings (loss) of unconsolidated entity $ ( 74 ) $ ( 72 )

On February 2, 2023, the Company entered into a loan funding agreement with Ashford Inc.

Per the agreement, Ashford Inc.

and the Company will provide OpenKey with a maximum loan amount of $ 5.0 million to be allocated on a pro-rata basis based on current ownership interests and funded quarterly, over the course of 2023.

The loan bears interest at an annual rate of 15 %.

Additionally, repayment of the loan principal and all accrued interest is due upon certain events.

On February 3, 2023, the Company funded approximately $ 99,000 .

The following table summarizes our note receivable from OpenKey (in thousands):

Line Item March 31, 2023 December 31, 2022

Investment in unconsolidated entity $ 100 $ —

The following table summarizes the interest income associated with the loan to OpenKey (in thousands):

Three Months Ended March 31,

Line Item 2023

Equity in earnings (loss) of unconsolidated entity $ 1

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Indebtedness, net

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Maturity (11)

Interest Rate September 30, 2022 December 31, 2021

Mortgage loan (3)

Park Hyatt Beaver Creek Resort & Spa April 2022 April 2022 LIBOR (1) + 3.00 %

Interest Rate March 31, 2023 December 31, 2022

Mortgage loan (3)

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Marriott Seattle Waterfront

Mortgage loan (4)

Bardessono Hotel and Spa August 2023 August 2023 LIBOR (1) + 2.55 %

Mortgage loan Bardessono Hotel and Spa August 2023 August 2023 SOFR (2) + 2.65 %

40,000 40,000

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42,500 42,500

Mortgage loan (4)

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

Mortgage loan The Ritz-Carlton Lake Tahoe January 2024 January 2024 SOFR (2) + 2.20 %

54,000 54,000

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Park Hyatt Beaver Creek Resort & Spa February 2024 February 2027 SOFR (2) + 2.86 %

70,500 70,500

Mortgage loan (8)

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30,000 30,000

Mortgage loan (4) (9)

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

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

80,000 80,000

Mortgage loan (10)

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

Four Seasons Resort Scottsdale December 2025 December 2027 SOFR (2) + 3.75 %

100,000 100,000

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

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__________________

(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 a LIBOR floor of 0.25 %.

(1) LIBOR rates were 4.86 % and 4.39 % at March 31, 2023 and December 31, 2022, respectively.

(2) SOFR rates were 4.80 % and 4.36 % at March 31, 2023 and December 31, 2022, respectively.

(3) On April 4, 2023, we amended this mortgage loan.

Terms of the amendment replaced the variable interest rate of LIBOR + 2.65 % with SOFR+ 2.75 %, extended the current maturity date to October 2023, and added one six-month extension option, subject to satisfaction of certain conditions.

(4) On April 18, 2023, we amended this mortgage loan.

Terms of the amendment replaced the variable interest rate of LIBOR + 2.55 % with SOFR+ 2.65 %, extended the current maturity date to November 2023, and added one six-month extension option, subject to satisfaction of certain conditions.

(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.

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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.

This mortgage loan has a LIBOR floor of 0.75 %.

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

(8) On January 18, 2023, we repaid this mortgage loan.

(9) 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.

(10) This mortgage loan has a SOFR floor of 1.00 %.

(11) The final maturity date assumes all available extension 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.

The Company determined that all of the forbearance and other agreements

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 that was amortized was approximately $ 468,000 and $ 523,000 , respectively, for the three months ended March 31, 2023 and 2022.

On January 18, 2023, the Company repaid its $ 54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach, which resulted in a gain on extinguishment of debt of $ 2.3 million for the three months ended March 31, 2023.

BRAEMAR HOTELS & RESORTS INC.

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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.

was primarily attributable to the premium that was recorded upon the assumption of the mortgage loan when the hotel was acquired.

Convertible Senior Notes

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

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.

The initial carrying amount of the liability component was calculated using a discount rate of 7.1 %.

The discount rate was based on the terms of debt instruments that were similar to the Convertible Senior Notes.

The $ 6.3 million carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the net proceeds of the Convertible Senior Notes.

The amount recorded in equity was not subject to remeasurement or amortization.

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 $ 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.

The Company also ceased recording non-cash interest expense associated with the amortization of the portion of the debt discount originally reflected in equity, while the initial purchase discount remains and will continue to be amortized through June 2026.

The Company recorded coupon interest expense of $ 970,000 and $ 970,000 for the three months ended March 31, 2023 and 2022, respectively.

The Company recorded discount amortization of $ 144,000 and $ 132,000 related to the initial purchase discount for the three months ended March 31, 2023 and 2022, with the remaining discount balance to be amortized through June 2026.

The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $ 6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances.

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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.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

As of March 31, 2023, we were in compliance with all covenants.

Derivative Instruments

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All derivatives are recorded at fair value.

Payments from counterparties on in-the-money interest rate caps are recognized as realized gains on our consolidated statements of operations.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Interest rate caps:

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Strike rate high end of range 3.50 % 3.50 %

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

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

Effective date range January 2023 February 2022

Termination date range January 2024 February 2024

Total cost of interest rate caps (in thousands) $ 755 $ 76

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Interest rate derivatives consisted of the following:

Interest rate caps:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Notional amount (in thousands) $ 960,500 $ 960,500

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Strike rate high end of range 4.50 % 4.50 %

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

Termination date range April 2023 - January 2025 January 2023- January 2025

Aggregate principal balance on corresponding mortgage loans (in thousands) $ 958,750 $ 959,000

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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.

As of March 31, 2023, 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:

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In applying the guidance in ASC 815, it was determined that the warrants should be classified as a liability as a result of certain settlement provisions.

The warrants are included in derivative liabilities on the condensed consolidated balance sheet and changes in value are reported as a component of unrealized gain (loss) on derivatives on the condensed consolidated statements of operations.

The warrants are included in derivative liabilities on the condensed consolidated balance sheets and changes in value are reported as a component of “realized and unrealized gain (loss) on derivatives” on the condensed consolidated statements of operations.

This is a Level 2 valuation technique.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value Measurements

Fair Value Hierarchy —Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below:

Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities.

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The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

The fair value of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps.

Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (LIBOR forward curves) and volatilities (Level 2 inputs).

Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (LIBOR/SOFR forward curves) and volatilities (Level 2 inputs).

We also incorporate credit valuation adjustments (Level 3 inputs) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.

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

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.

In determining the fair values of our derivatives at March 31, 2023, the LIBOR/SOFR interest rate forward curve (Level 2 inputs) assumed a downtrend from 4.858 % to 3.125 % for the remaining term

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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(Level 3) Total

September 30, 2022

March 31, 2023

Derivative assets:

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Net $ — $ 4,752 $ — $ 4,752

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Quoted Market Prices (Level 1) Significant Other

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Gain (Loss) Recognized in Income

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

2022 2021 2022 2021

Three Months Ended March 31,

Derivative assets:

Interest rate derivatives - caps $ ( 437 ) $ 843

$ ( 48 ) $ 3,024 (1)

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

Total $ ( 437 ) $ 843

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Unrealized gain (loss) on derivatives $ ( 2,201 ) (1)

Realized gain (loss) on interest rate caps 1,867 (1) (2)

Net $ ( 334 ) $ 408

(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.

(1) Reported in “realized and unrealized gain (loss) on derivatives” in our consolidated statements of operations.

(2) Represents settled and unsettled payments from counterparties on interest rate caps.

Summary of Fair Value of Financial Instruments

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Value Estimated

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Due to third-party hotel managers 1,463 1,463 2,096 2,096

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cash, cash equivalents and restricted cash .

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

We estimated the fair value of the total indebtedness to be approximately 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.

We estimated the fair value of the total indebtedness to be approximately 90.6 % to 100.2 % of the carrying value of $ 1.3 billion at March 31, 2023, and approximately 92.0 % to 101.6 % of the carrying value of $ 1.3 billion at December 31, 2022.

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Income (Loss) Per Share

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

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

2022 2021 2022 2021

Three Months Ended March 31,

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

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dividends on preferred stock ( 10,350 ) ( 3,303 )

deemed dividends on preferred stock ( 2,454 ) —

dividends on common stock ( 3,289 ) ( 707 )

Loss on extinguishment of preferred stock - Series B — ( 111 ) — ( 4,595 )

dividends on unvested performance stock units ( 36 ) ( 7 )

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dividends on common stock 3,289 707

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

Distributed and undistributed net income (loss) - basic $ 3,185 $ 11,146

Interest expense on Convertible Senior Notes — 1,103

Income (loss) attributable to redeemable noncontrolling interest in operating partnership 261 —

Dividends on preferred stock - Series E (inclusive of deemed dividends) — 1,399

Dividends on preferred stock - Series M (inclusive of deemed dividends) — 21

Distributed and undistributed net income (loss) - diluted $ 3,446 $ 13,669

Weighted average common shares outstanding:

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Effect of assumed exercise of warrants — 3

Effect of assumed conversion of operating partnership units 5,980 —

Effect of assumed conversion of Convertible Senior Notes — 13,609

Effect of assumed conversion of preferred stock - Series E — 10,258

Effect of assumed conversion of preferred stock - Series M — 147

Weighted average common shares outstanding – diluted 72,478 89,895

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

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

2022 2021 2022 2021

Three Months Ended March 31,

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

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Dividends on preferred stock - Series B 1,058 1,058

Loss on extinguishment of preferred stock - Series B — 111 — 4,595

Interest expense on Convertible Senior Notes 1,114 —

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

Dividends on preferred stock - Series M 447 4 596 4

Dividends on preferred stock - Series E (inclusive of deemed dividends) 9,730 —

Dividends on preferred stock - Series M (inclusive of deemed dividends) 1,191 —

Total $ 13,138 $ 2,240

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Effect of unvested restricted shares — 17

Effect of unvested performance stock units 353 1

Effect of assumed conversion of operating partnership units — 5,856

Effect of assumed conversion of preferred stock - Series B 4,116 4,116

Effect of assumed conversion of exchanged preferred stock - Series B — — — 485

Effect of assumed conversion of Convertible Senior Notes 13,609 —

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

As of March 31, 2023, there were approximately 2.4 million Performance LTIP units, representing 200 % of the target, outstanding.

With respect to the 2021, 2022 and 2023 award agreements, the compensation committee shifted to a new performance metric, pursuant to which, the performance awards will be eligible to vest, from 0 % to 200 % of target, based on achievement of certain performance targets over the three -year performance period.

The performance criteria for the 2021, 2022 and 2023 performance grants are based on performance conditions under the relevant literature.

The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the applicable measurement date

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 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.

With respect to the 2021 and 2022 award agreements, the compensation committee shifted to a new performance metric, pursuant to which, the performance awards will be eligible to vest, from 0 % to 200 % of target, based on achievement of certain performance targets over the three-year performance period.

The performance criteria for the 2021 and 2022 performance grants are based on performance conditions under the relevant literature.

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

fair value of the award.

The grant date fair value of the award may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.

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 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 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:

September 30, 2022 December 31, 2021

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

Adjustments to redeemable noncontrolling interests (1)

In March 2023, the Company granted approximately 353,000 Performance LTIP units, representing 200 % of the target, and a vesting period of approximately three years.

As of March 31, 2023, the Company does not have sufficient shares of common stock available under its incentive stock plan to settle any future redemptions of the Performance LTIP units, upon reaching the conditions required for redemption.

As a result, the 2023 awards are classified as liability awards on the condensed consolidated balance sheet and are included in “due to Ashford Inc., net” on the condensed consolidated balance sheets.

The 2023 awards are subject to remeasurement each reporting period.

The fair value of the awards as of March 31, 2023 was $ 3.86 per share.

As of March 31, 2023, we have issued a total of approximately 3.8 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 1.2 million Performance LTIP units issued from March 2015 to March 2023, had reached full economic parity with, and are convertible into, common units.

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

March 31, 2023 December 31, 2022

Redeemable noncontrolling interests in Braemar OP (in thousands) $ 34,820 $ 40,555

Adjustments to redeemable noncontrolling interests (1) (in thousands)

Ownership percentage of operating partnership 7.47 % 7.69 %

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership $ ( 261 ) $ ( 967 )

Distributions declared to holders of common units, LTIP units and Performance LTIP units $ 361 $ 83

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

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

2022 2021 2022 2021

Common units converted to common stock — — — 2

Fair value of common units converted $ — $ — $ — $ 15

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On February 24, 2023, at the option of Mr.

Bennett’s 169,523 vested LTIP units that achieved economic parity with his common units were redeemed for common units on a one-for-one basis.

On February 24, 2023, the Company received a Notice of Exercise of Redemption Right (the “Redemption Notice”), pursuant to which Mr.

Bennett elected to redeem the common units and such redemption was settled in cash at the Company’s election based on the average of the closing price of the Company’s common stock for the ten consecutive trading days ending on February 23, 2023.

Additionally, on February 24, 2023, Mr.

Bennett elected to redeem an additional 1,254,254 common units and following receipt of the Redemption Notice, such redemption was settled in cash at the Company’s election at a price per common unit based on the average of the closing price of the Company’s common stock for the ten consecutive trading days ending on February 23, 2023.

The cash redemption for the 1,423,777 common units totaled approximately $ 7.0 million.

Equity and Stock-Based Compensation

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Common stock dividends declared $ 3,334 $ 720

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restricted Stock —We incur stock-based compensation expense in connection with restricted stock awarded to certain employees of Ashford LLC and its affiliates.

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

In 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.

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

In March 2022, 41,000 PSUs with a fair value of $ 240,000 and a vesting period of three years were granted.

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 .

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 .

The performance criteria for the 2021, 2022 and 2023 performance grants are based on performance conditions under the relevant literature, and the 2021, 2022 and 2023 performance grants were issued to non-employees.

The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, which may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.

The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the corresponding measurement date fair value of the award, which may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.

In March 2023, 383,000 PSUs with a vesting period of approximately three years were granted.

The 2023 awards may be settled in cash or shares of the Company’s common stock solely at the option of the Company.

As of March 31, 2023, the Company does not have sufficient shares available under its incentive stock plan to settle the 2023 awards in shares of the Company’s common stock.

As a result, the 2023 awards are classified as liability awards and are included in “due to Ashford Inc., net” on the condensed consolidated balance sheet.

The 2023 awards are subject to remeasurement each reporting period.

The fair value of the awards as of March 31, 2023 was $ 2.8 million.

8.25 % Series D Cumulative Preferred Stock —The dividend for all issued and outstanding shares of the Company’s Series D Cumulative Preferred Stock (the “Series D Preferred Stock”) is set at $ 2.0625 per annum per share.

The following table summarizes dividends declared (in thousands):

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

2022 2021 2022 2021

Three Months Ended March 31,

Series D Cumulative Preferred Stock $ 825 $ 825

Stock Repurchases —On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $ 0.01 per share having an aggregate value of up to $ 50 million.

Stock Repurchases —On December 7, 2022, our board of directors approved a new stock repurchase program pursuant to which the board granted a repurchase authorization to acquire shares of the Company’s common stock, par value $ 0.01 per share, having an aggregate value of up to $ 25 million.

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

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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

anniversary of the SEDA;

or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”).

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

“Market Price” shall mean the lowest daily VWAP (as defined below) of the Company’s common stock during the five consecutive trading days commencing on the trading day following the date the Company submits an advance notice to YA.

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

during regular trading hours.

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

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

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

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

There are no other restrictions on future financing transactions.

The SEDA does not contain any right of first refusal, participation rights, penalties or liquidated damages.

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 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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Common shares sold to YA — — — 1,700

Proceeds received $ — $ — $ — $ 10,000

Common Stock Resale Agreement —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.

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 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

Common shares sold to Lincoln Park — — — 766

Additional commitment shares — — — 15

Total common shares issued to Lincoln Park — — — 781

Proceeds received $ — $ — $ — $ 4,217

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.

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

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

BRAEMAR HOTELS & RESORTS INC.

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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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Common shares issued — 4,183 — 4,183

Gross proceeds received $ — $ 21,363 $ — $ 21,363

Commissions — 214 — 214

Net proceeds $ — $ 21,149 $ — $ 21,149

Preferred Stock

During the three months ended March 31, 2023, we repurchased 3.9 million shares of our common stock for approximately $ 18.9 million.

As of March 31, 2023, the Company has completed the $ 25.0 million repurchase authorization .

Redeemable Preferred Stock

5.50 % Series B Cumulative Convertible Preferred Stock

4 unchanged sentences

The Company may, at its option, cause the Series B Convertible Preferred Stock to be converted in whole or in part, on a pro-rata basis, into fully paid and nonassessable shares of the Company’s common stock at the conversion price, provided that the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110 % of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Additionally, the Series B Convertible Preferred Stock contains cash redemption features that consist of:

3 unchanged sentences

A “REIT Termination Event,” shall mean the earliest of:

(i) filing of income tax return where the Company does not compute its income as a REIT;

(i) filing of a federal income tax return where the Company does not compute its income as a REIT;

(ii) stockholders’ approval on ceasing to be qualified as a REIT;

4 unchanged sentences

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes dividends declared (in thousands):

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

2022 2021 2022 2021

Series B Convertible Preferred Stock $ 1,059 $ 1,058 $ 3,175 $ 3,689

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

The table below summarizes the activity (in thousands):

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

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

Three Months Ended March 31,

Series B Convertible Preferred Stock $ 1,058 $ 1,058

30 120 1,953 7,291

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

Series E Redeemable Preferred Stock

On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell, from time to time, shares of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”).

Pursuant to such equity distribution agreements, the Company is offering a maximum of 20,000,000 shares of Series E Preferred Stock in a primary offering price of $ 25.00 per share.

Pursuant to such equity distribution agreements, the Company is offering a maximum of 20,000,000 shares of Series E Preferred Stock in a primary offering at a price of $ 25.00 per share.

The Company is also offering a maximum of 8,000,000 shares of the Series E Preferred Stock pursuant to a dividend reinvestment plan (the “DRIP”) at $ 25.00 per share (the “Stated Value”).

1 unchanged sentence

Holders of the Series E Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class.

If and whenever dividends on any shares of the 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 E 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.

If and whenever dividends on any shares of the 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 E Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series E 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 E Preferred Stock is also subject to conversion upon certain events constituting a change of control.

The Series E Preferred Stock is also subject to conversion upon certain

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

events constituting a change of control.

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

3 unchanged sentences

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

The Series E Preferred Stock cash dividends are as follows:

2 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 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 are payable on a monthly basis in arrears on the 15th day of each month (or, if such payment date is not a business day, the next succeeding business day) to holders of record at the close of business on the last business day of each month immediately preceding the applicable dividend payment date.

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 E Preferred Stock dividend distributions automatically reinvested in additional shares of the Series E Preferred Stock at a price of $ 25.00 per share.

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

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Series E Preferred Stock shares issued (1)

4,362 266 7,151 266

Net proceeds $ 85,444 $ 33,236

__________________

(1) Exclusive of shares issued under the dividend reinvestment plan.

(1) Exclusive of shares issued under the DRIP.

The Series E 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 of the Company’s control.

3 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Series E Preferred Stock $ 378,906 $ 291,076

Adjustments to Series E Preferred Stock (1)

Cumulative adjustments to Series E Preferred Stock (1)

$ 11,599 $ 9,403

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes dividends declared (in thousands):

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

2022 2021 2022 2021

Three Months Ended March 31,

Series E Preferred Stock $ 7,534 $ 1,399

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

Three Months Ended March 31,

Series E Preferred Stock shares redeemed 11 —

Redemption amount, net of redemption fees $ 282 $ —

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Series M Redeemable Preferred Stock

On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell, from time to time, shares of the Series M Redeemable Preferred Stock (the “Series M Preferred Stock”).

Pursuant to such equity distribution agreements, the Company is offering a maximum of 20,000,000 shares of the Series M Preferred Stock (par value $ 0.01 ) in a primary offering price of $ 25.00 per share (or “Stated Value”).

Pursuant to such equity distribution agreements, the Company is offering a maximum of 20,000,000 shares of the Series M Preferred Stock (par value $ 0.01 ) in a primary offering at a price of $ 25.00 per share (or “Stated Value”).

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.

1 unchanged sentence

Holders of the Series M Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class.

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.

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 (voting together as a single class with all other classes or series of capital stock ranking on a parity with the 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.

3 unchanged sentences

The redemption fee shall be an amount equal to:

• 1.5 % of the Stated Value of $ 25.00 per share beginning on the Series M Original Issue Date (as defined below) of the shares of Series M Preferred Stock to be redeemed;

• 1.5 % of the Stated Value of $ 25.00 per share beginning on the Series M Original Issue Date (as defined in the Articles Supplementary) of the shares of Series M Preferred Stock to be redeemed;

• 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.

1 unchanged sentence

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).

Beginning one year from the date of original issuance of each share of Series M Preferred Stock (the “Series M Original Issue Date”) and on each one-year anniversary thereafter for such share of Series M Preferred Stock, the dividend rate shall increase by 0.10 % per annum;

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.

Beginning one year from the date of original issuance of each share of Series M Preferred Stock and on each one-year anniversary thereafter for such share

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

of Series M Preferred Stock, the dividend rate shall increase by 0.10 % per annum;

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 are payable on a monthly basis and in arrears on the 15th day of each month (or, if such payment date is not a business day, on the next succeeding business day) to holders of record at the close of business on the last business day of each month immediately preceding the applicable dividend payment date.

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

The Company has a DRIP that allows 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.

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Series M Preferred Stock shares issued (1)

673 15 1,040 15

Net proceeds $ 12,869 $ 810

__________________

(1) Exclusive of shares issued under the dividend reinvestment plan.

(1) Exclusive of shares issued under the DRIP.

The Series M 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 the Company’s control.

3 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Series M Preferred Stock $ 48,294 $ 35,182

Adjustments to Series M Preferred Stock (1)

Cumulative adjustments to Series M Preferred Stock (1)

$ 1,070 $ 812

__________________

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

The following table summarizes dividends declared (in thousands):

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

2022 2021 2022 2021

Three Months Ended March 31,

Series M Preferred Stock $ 932 $ 21

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

Three Months Ended March 31,

Series M Preferred Stock shares redeemed 1 —

Redemption amount, net of redemption fees $ 25 $ —

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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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).

1 unchanged sentence

We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, risk management advisory and asset management services, as specified in the advisory agreement.

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.

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

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Advisory services fee

1 unchanged sentence

Reimbursable expenses (1)

1,191 694 3,460 1,696

Equity-based compensation (2)

3,346 2,994 8,293 6,666

Incentive fee — 977

9 unchanged sentences

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 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.

Archie Bennett, Jr., for office space allocated to us under our advisory agreement.

It will be held as security for the payment of our allocated share of office space rental.

On September 27, 2022, an agreement was entered into by Ashford Inc., Ashford Trust and Braemar pursuant to which the Advisor is to implement the REITs' cash management strategies.

This will include actively managing the REITs excess cash by primarily investing in short-term U.S.

Treasury securities.

The annual fee is 20 bps of the average daily balance of the funds managed by the Advisor and is payable monthly in arrears.

As of March 31, 2023, “due to Ashford Inc.” includes a $ 365,000 security deposit paid to Remington Hotel Corporation (“RHC”) for office space allocated to us under our advisory agreement.

It will be held as security for the payment of our

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

allocated share of the office space rental.

If unused it will be returned to us upon lease expiration or earlier termination.

In connection with the refinancing of the Park Hyatt Beaver Creek mortgage loan in February 2022, the Company paid an affiliate of Lismore Capital II LLC (“Lismore”) a fee of approximately $ 637,000 .

Lismore is a subsidiary of Ashford Inc.

As of December 31, 2022, RHC was indirectly owned by Mr.

Bennett and Mr.

Archie Bennett, Jr.

and the $ 365,000 was included in “due from related parties, net.” On January 3, 2023, Ashford Inc.

acquired RHC.

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

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 2022 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 have limited our ability, in our discretion and at our 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 our advisor.

On March 2, 2023, the Company entered into a second Limited Waiver Under Advisory Agreement (the “2023 Limited Waiver”) with Braemar OP, Braemar TRS and its advisor.

Pursuant to the 2023 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 our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2023 cash incentive compensation to employees and other representatives of our advisor.

We engage Lismore or its subsidiaries to provide debt placement services and assist with loan modifications on our behalf.

During the three months ended March 31, 2023 and 2022, we made payments of $ 0 and $ 637,000 , respectively, to Lismore or its subsidiaries.

Ashford Securities

On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by Ashford Inc., Ashford Trust and Braemar with respect to expenses to be reimbursed to Ashford Securities LLC, a subsidiary of Ashford Inc.

On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by Ashford Inc., Ashford Trust and Braemar (collectively, the “Parties” and each individually a “Party”) with respect to funding certain expenses of Ashford Securities LLC, a subsidiary of Ashford Inc.

(“Ashford Securities”).

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 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.

Upon reaching the earlier of $ 400 million in aggregate capital raised, or June 10, 2023, there will be a true up (the “Amended and Restated True-Up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual amount contributed by each company will be based on the actual amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively, through Ashford Securities (the resulting ratio of contributions among the Parties, the “Initial True-up Ratio”).

On January 27, 2022, Ashford Trust, Braemar and Ashford Inc.

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.

On February 1, 2023, Braemar entered into a Third Amended and Restated Contribution Agreement with Ashford Inc.

and Ashford Trust.

The Third Amended and Restated Contribution Agreement states that after the Amended and Restated True-Up Date occurs, capital contributions for the remainder of fiscal year 2023 will be divided between each Party based on the Initial True-Up Ratio.

Thereafter on a yearly basis at year-end, starting with the year-end of 2023, there will be a true-up between the Parties whereby there will be adjustments so that the capital contributions made by each Party will be based on the cumulative amount of capital raised by each Party through Ashford Securities as a percentage of the total amount raised by the Parties collectively through Ashford Securities since June 10, 2019 (the resulting ratio of capital contributions among Braemar, Ashford Inc.

and Ashford Trust following this true-up, the “Cumulative Ratio”).

Thereafter, the capital contributions will be divided among each Party in accordance with the Cumulative Ratio, as recalculated at the end of each year.

During the year ended December 31, 2022, the funding estimate was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities.

As of December 31, 2022, Braemar had funded approximately $ 5.8 million and had a payable, included in “due to Ashford Inc., net” on the condensed consolidated balance sheet, of approximately $ 6.6 million.

In March 2023, Braemar paid Ashford Inc.

$ 8.7 million as a result of the contribution true-up between entities described above.

As of March 31, 2023, Braemar has funded approximately $ 15.9 million.

As of March 31, 2023, Braemar has a pre-funded balance of approximately $ 2.1 million that is included in “other assets” and approximately $ 343,000 that is included in “due to Ashford Inc., net” on the condensed consolidated balance sheet.

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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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Line Item 2023 2022

Corporate, general and administrative $ 1,195 $ 527

Enhanced Return Funding Program

Concurrent with Amendment No.

1 to the Fifth Amended and Restated Advisory Agreement with Ashford Inc.

(“Amendment No.

1”), on January 15, 2019, the Company also entered into the Enhanced Return Funding Program Agreement (the “ERFP Agreement”) with Ashford Inc.

The “key money investments” concept previously contemplated by our advisory agreement was replaced with the ERFP Agreement.

The Fifth Amended and Restated Advisory Agreement was also amended to name Ashford Inc.

and its subsidiaries as the Company’s sole and exclusive provider of asset management, design and construction and other services offered by Ashford Inc.

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 Braemar and Ashford Inc., 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).

Each funding will equal 10 % of the property acquisition price and will be made either at the time of the property acquisition or at any time generally within the two-year period following the date of such acquisition, in exchange for FF&E for use at the acquired property or any other property owned by Braemar OP.

The initial term of the ERFP Agreement was two years (the “Initial Term”).

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 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.

As a result, the ERFP Agreement terminated in accordance with its terms on January 15, 2022.

Design and Construction Services

In connection with Ashford Inc.’s August 8, 2018 acquisition of Remington Lodging’s design and construction business, we entered into a design and construction services agreement with Ashford Inc.’s subsidiary, Premier Project Management LLC (“Premier”), pursuant to which Premier provides design and construction services to our hotels, including construction management, interior design, architectural services, and the purchasing, freight management, and supervision of installation of FF&E and related services.

Premier Project Management LLC (“Premier”), as a subsidiary of Ashford Inc., provides design and construction services to our hotels, including construction management, interior design, architectural services, and the purchasing, freight management, and supervision of installation of FF&E and related services.

Pursuant to the design and construction services agreement, we pay Premier:

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provided that if the purchase price exceeds $ 2.0 million for a single hotel in a calendar year, then the purchasing fee is reduced to 6 % of the FF&E purchase price in excess of $ 2.0 million for such hotel in such calendar year).

On March 20, 2020, we amended the design and construction services agreement to provide that Premier’s fees shall be paid by the Company to Premier upon the completion of any work provided by third-party vendors to the Company.

Hotel Management Services

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

We also have a mutual exclusivity agreement with Remington Hotels, pursuant to which:

(i) we have agreed to engage Remington Hotels to provide management services with respect to any hotel we acquire or invest in, to the extent we have the right and/or control the right to direct the management of such hotel;

and (ii) Remington Hotels has agreed to grant us a right of first refusal to purchase any opportunity to develop or construct a hotel that it identifies that meets our initial investment guidelines.

We are not, however, obligated to engage Remington Hotels if our independent directors either:

(i) unanimously vote to hire a different manager or developer;

or (ii) by a majority vote elect not to engage such related party because either special circumstances exist such that it would be in the best interest of our Company not to engage such related party, or, based on related party’s prior performance, it is believed that another manager could perform the management or other duties materially better.

Ashford Trust

As of December 31, 2021, the Company had a $ 728,000 receivable from Ashford Trust, included in “due from related parties, net.” The receivable relates to a legal settlement between Ashford Trust and the City of San Francisco regarding a transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off from Ashford Trust.

The transfer taxes were initially paid by Braemar at the time of the spin-off.

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 nine months ended September 30, 2022.

At March 31, 2023, Remington Hotels managed four of our 16 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 operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

Commitments and Contingencies

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.

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at March 31, 2023, 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 3 % to 5 % of gross revenues for capital improvements.

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

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

Three Months Ended March 31,

Line Item 2023 2022

Other hotel expenses $ 202 $ 102

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.

Management Fees —Under hotel management agreements for our hotel properties existing at March 31, 2023, 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 2027 through December 2065, with renewal options.

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Tax years 2018 through 2022 remain subject to potential examination by certain federal and state taxing authorities.

Litigation —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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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.

On July 20, 2020, Accor filed an Amended Answer and Counterclaims against Ashford TRS Chicago II, in which Accor asserted two causes of action:

First, Accor asserted a counterclaim for declaratory judgment that Accor correctly calculated the amount payable to Ashford TRS Chicago II under the Accor management agreement to “cure” Accor’s performance test failure (the “Cure Amount”).

Second, Accor asserted a counterclaim for breach of contract alleging that Ashford TRS Chicago II breached the Accor management agreement by wrongfully maintaining that the Cure Amount for the 2018 and 2019 Performance Test failure is $ 1,031,549 instead of $ 535,120 .

On February 16, 2022, the parties entered into a settlement agreement agreeing to:

1) amend the Accor management agreement;

2) dismiss the lawsuit and counterclaims;

3) stipulate to the failure of the performance tests and cure amounts for 2018 of $ 867,682 and 2019 of $ 784,919 ;

and 4) arbitrate whether the performance tests for 2020 and 2021 were valid and/or required equitable adjustment.

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.

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.

California employment laws, which class action affects two hotels owned by subsidiaries of the Company.

The court has entered an order granting class certification with respect to:

(1) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks;

and (2) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment.

(i) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks;

and (ii) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment.

Notices to potential class members were sent out on February 2, 2021.

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however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery.

While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a 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 September 30, 2022, no amounts have been accrued.

The opt out period has been extended until such time that discovery has concluded.

If this litigation goes to trial, we expect that the earliest the trial would occur is the last quarter of 2023, based on various extensions to which the parties have agreed.

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

As of March 31, 2023, 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 September 30, 2022 and December 31, 2021, all of our hotel properties were in the U.S.

As of March 31, 2023 and December 31, 2022, 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

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