What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-08 · 346 added, 179 removed, 876 unchanged (37% of the section changed)

4 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Investments in hotel properties, gross $ 2,360,842 $ 2,325,093

7 unchanged sentences

Prepaid expenses 18,172 7,044

Deferred costs, net 75 —

Investment in unconsolidated entity 1,699 1,689

17 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 March 31, 2023 and December 31, 2022

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,078,017 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

65,426 65,426

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

Series E redeemable preferred stock, $ 0.01 par value, 16,485,987 and 12,656,529 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

379,403 291,076

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

Series M redeemable preferred stock, $ 0.01 par value, 1,959,622 and 1,428,332 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

48,405 35,182

1 unchanged sentence

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

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2023 and December 31, 2022

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 65,993,893 and 69,919,065 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 716,987 734,134

9 unchanged sentences

(unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

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

2023 2022 2023 2022

Rooms $ 117,137 $ 112,527 $ 254,664 $ 217,719

11 unchanged sentences

Advisory services fee 8,215 6,305 16,163 13,627

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

Corporate general and administrative 3,896 3,438 6,716 5,933

27 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

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

2023 2022 2023 2022

NET INCOME (LOSS) $ ( 3,138 ) $ 16,680 $ 13,466 $ 32,284

18 unchanged sentences

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

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

Purchase of common stock — — ( 1 ) — ( 4 ) — — ( 4 ) — — — — — — —

Equity-based compensation — — — — 1,262 — — 1,262 — — — — — — 1,752

Issuance of restricted shares/units — — 45 — — — — — — — — — — — —

Issuance of preferred stock — — — — — — — — — — 32 828 4 76 —

Dividends declared – common stock ($ 0.05 /share)

— — — — — ( 3,335 ) — ( 3,335 ) — — — — — — —

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)

— — — — — ( 7,986 ) — ( 7,986 ) — — — — — — —

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

— — — — — ( 1,008 ) — ( 1,008 ) — — — — — — —

Contributions from noncontrolling interests — — — — — — 2,026 2,026 — — — — — — —

Distributions to noncontrolling interests — — — — — — ( 315 ) ( 315 ) — — — — — — ( 361 )

Redemption/conversion of operating partnership units — — — — — — — — — — — — — — ( 123 )

Net income (loss) — — — — — ( 1,846 ) ( 367 ) ( 2,213 ) — — — — — — ( 925 )

Redemption of preferred stock — — — — — — — — — — ( 21 ) ( 507 ) ( 4 ) ( 90 ) —

Redemption value adjustment – preferred stock — — — — — ( 301 ) — ( 301 ) — — — 176 — 125 —

Redemption value adjustment — — — — — ( 11 ) — ( 11 ) — — — — — — 11

Balance at June 30, 2023 1,600 $ 16 65,994 $ 659 $ 716,987 $ ( 341,210 ) $ ( 12,669 ) $ 363,783 3,078 $ 65,426 16,485 $ 379,403 1,960 $ 48,405 $ 35,174

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

2 unchanged sentences

Issuance of preferred stock — — — — — — — — — — 3,860 86,744 537 12,955 —

Issuance of restricted shares/units — — 45 — — — — — — — — — — — —

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

13 unchanged sentences

Net income (loss) — — — — — 14,188 ( 58 ) 14,130 — — — — — — ( 664 )

Redemptions of preferred stock — — — — — — — — — — ( 11 ) ( 282 ) ( 1 ) ( 25 ) —

Redemption of preferred stock — — — — — — — — — — ( 32 ) ( 789 ) ( 5 ) ( 115 ) —

Redemption value adjustment – preferred stock — — — — — ( 2,755 ) — ( 2,755 ) — — — 2,372 — 383 —

Redemption value adjustment — — — — — ( 7 ) — ( 7 ) — — — — — — 7

Balance at June 30, 2023 1,600 $ 16 65,994 $ 659 $ 716,987 $ ( 341,210 ) $ ( 12,669 ) $ 363,783 3,078 $ 65,426 16,485 $ 379,403 1,960 $ 48,405 $ 35,174

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 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

Purchase of common stock — — — — 5 — — 5 — — — — — — —

Equity-based compensation — — — — 1,464 — — 1,464 — — — — — — 1,832

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

Issuance of restricted shares/units — — 45 — — — — — — — — — — — —

Forfeiture of restricted common shares — — ( 5 ) — — — — — — — — — — — —

Issuance of preferred stock — — — — — — — — — — 1,319 29,392 334 8,003 —

Dividends declared – common stock ($ 0.01 /share)

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

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)

— — — — — ( 2,053 ) — ( 2,053 ) — — — — — — —

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

— — — — — ( 128 ) — ( 128 ) — — — — — — —

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

Net income (loss) — — — — — 14,366 1,468 15,834 — — — — — — 846

Redemption of preferred stock — — — — — — — — — — ( 2 ) ( 50 ) — — —

Redemption value adjustment – preferred stock — — — — — ( 1,160 ) — ( 1,160 ) — — — 951 — 209 —

Redemption value adjustment — — — — — 4,594 — 4,594 — — — — — — ( 4,594 )

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

8.25 % Series D Cumulative Preferred Stock

8 unchanged sentences

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

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

Issuance of preferred stock — — — — — — — — — — 2,800 62,485 367 8,805 —

Issuance of restricted shares/units — — 45 — — — — — — — — — — — —

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

12 unchanged sentences

Net income (loss) — — — — — 29,029 1,442 30,471 — — — — — — —

Redemption of preferred stock — — — — — — — — — — ( 2 ) ( 50 ) — — —

Redemption value adjustment – preferred stock — — — — — ( 2,153 ) — ( 2,153 ) — — — 1,923 — 230 —

Redemption value adjustment — — — — — 208 — 208 — — — — — — ( 208 )

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

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

See Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) $ 13,466 $ 32,284

Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 45,088 38,012

24 unchanged sentences

Proceeds from property insurance 327 36

Payments for initial franchise fee ( 75 ) —

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

10 unchanged sentences

Payments for dividends and distributions ( 26,139 ) ( 7,334 )

Proceeds from issuance of preferred stock 98,009 33,735

Proceeds from issuance of common stock — ( 36 )

Net proceeds from issuance of preferred stock 97,930 71,016

Common stock offering costs — ( 102 )

Contributions from noncontrolling interest in consolidated entities 4,050 164

6 unchanged sentences

Cash, cash equivalents and restricted cash at end of period $ 191,464 $ 299,149

Three Months Ended March 31,

Six Months Ended June 30,

SUPPLEMENTAL CASH FLOW INFORMATION

3 unchanged sentences

Dividends and distributions declared but not paid $ 8,917 $ 3,535

Common stock purchases accrued but not paid 352 552

Assumption of debt in hotel acquisition — 58,601

1 unchanged sentence

Issuance of common stock for hotel acquisition — 35,040

Accrued common stock offering expense — 39

Accrued preferred stock offering expenses — 105

27 unchanged sentences

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

Remington Lodging & Hospitality, LLC (“Remington Hotels”), a subsidiary of Ashford Inc., manages four of our 16 hotel properties.

Remington Lodging & Hospitality, LLC (“Remington Hospitality”), a subsidiary of Ashford Inc., manages four of our 16 hotel properties.

Third-party management companies manage the remaining hotel properties.

2 unchanged sentences

These products and services include, but are not limited to, design and construction services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory 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.

The accompanying condensed consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of June 30, 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 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”).

As of June 30, 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 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.

As of June 30, 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.

Lease revenue from Braemar TRS is eliminated in consolidation.

The hotel properties are operated under management contracts with Marriott Hotel Services, Inc.

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

The hotel properties are operated under management contracts with Marriott Hotel Services, LLC (“Marriott”), Hilton Management LLC (“Hilton”), Accor Management US Inc.

(“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.

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

Significant Accounting Policies

4 unchanged sentences

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

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

We have condensed

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

GAAP in the accompanying unaudited condensed consolidated financial statements.

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.

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

6 unchanged sentences

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

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;

Consequently, operating results for the three and six months ended June 30, 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.

4 unchanged sentences

Actual results could differ from those estimates.

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.

Recently Adopted Accounting Standards —In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

9 unchanged sentences

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

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

11 unchanged sentences

Total 16 $ 117,137 $ 47,776 $ 21,794 $ 186,707

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

10 unchanged sentences

Total 15 $ 112,527 $ 42,269 $ 20,098 $ 174,894

Six Months Ended June 30, 2023

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

California 6 $ 65,570 $ 21,940 $ 10,756 $ 98,266

Puerto Rico 1 28,300 9,935 6,224 44,459

Arizona 1 22,081 11,786 4,659 38,526

Colorado 1 16,207 8,172 4,672 29,051

Florida 2 36,939 19,129 12,336 68,404

Illinois 1 11,304 2,930 767 15,001

Pennsylvania 1 12,163 2,646 631 15,440

Washington 1 12,414 2,037 823 15,274

Washington, D.C.

1 20,210 11,209 859 32,278

USVI 1 29,476 10,220 5,613 45,309

Total 16 $ 254,664 $ 100,004 $ 47,340 $ 402,008

Six Months Ended June 30, 2022

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

California 6 $ 65,284 $ 22,429 $ 9,169 $ 96,882

Puerto Rico 1 17,403 5,832 3,796 27,031

Colorado 1 14,483 8,846 4,764 28,093

Florida 2 44,714 19,264 13,632 77,610

Illinois 1 10,301 3,006 740 14,047

Pennsylvania 1 9,233 1,626 520 11,379

Washington 1 8,175 1,298 625 10,098

Washington, D.C.

1 13,600 5,733 992 20,325

USVI 1 34,526 10,942 5,841 51,309

Total 15 $ 217,719 $ 78,976 $ 40,079 $ 336,774

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Investments in Hotel Properties, net

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Land $ 630,842 $ 630,489

7 unchanged sentences

Impairment Charges

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

During the three and six months ended June 30, 2023 and 2022, no impairment charges were recorded.

Investment in Unconsolidated Entity

1 unchanged sentence

(“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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

As of June 30, 2023, the Company has made equity investments in OpenKey totaling $ 2.9 million.

All investments were 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.

2 unchanged sentences

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

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

No such impairment was recorded for the three and six months ended June 30, 2023 and 2022.

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Carrying value of the investment in OpenKey (in thousands) $ 1,535 $ 1,689

1 unchanged sentence

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

Three Months Ended March 31,

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

Line Item 2023 2022 2023 2022

5 unchanged sentences

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 .

On June 9, 2023, the Company funded approximately $ 59,000 .

As of June 30, 2023, the Company has funded approximately $ 158,000 .

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

Line Item March 31, 2023 December 31, 2022

Line Item June 30, 2023 December 31, 2022

Investment in unconsolidated entity $ 164 $ —

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.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

Line Item 2023 2023

Equity in earnings (loss) of unconsolidated entity $ 5 $ 6

Indebtedness, net

2 unchanged sentences

Maturity (11)

Interest Rate March 31, 2023 December 31, 2022

Interest Rate June 30, 2023 December 31, 2022

Mortgage loan (3)

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

$ 98,250 $ 98,500

Mortgage loan (4)

Hotel Yountville May 2023 May 2023 LIBOR (1) + 2.55 %

51,000 51,000

Mortgage loan (5)

The Notary Hotel June 2023 June 2025 LIBOR (1) + 2.16 %

435,000 435,000

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

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

4 unchanged sentences

42,500 42,500

Mortgage loan (3)

The Ritz-Carlton Sarasota October 2023 April 2024 SOFR (2) + 3.60 %

Mortgage loan (4)

Hotel Yountville November 2023 May 2024 SOFR (2) + 2.65 %

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

54,000 54,000

Mortgage loan

Capital Hilton February 2024 February 2024 LIBOR (1) + 1.70 %

Mortgage loan Capital Hilton February 2024 February 2024 LIBOR (1) + 1.70 %

195,000 195,000

6 unchanged sentences

Mortgage loan (8)

The Notary Hotel June 2024 June 2025 LIBOR (1) + 2.61 %

293,180 435,000

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

Mortgage loan (9)

C Beverly Hills Hotel August 2024 August 2024 LIBOR (1) + 3.60 %

12 unchanged sentences

__________________

(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.

(1) LIBOR rates were 5.22 % and 4.39 % at June 30, 2023 and December 31, 2022, respectively.

(2) SOFR rates were 5.14 % and 4.36 % at June 30, 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.

Effective June 1, 2023, the variable interest rate increased from SOFR + 2.75 % to SOFR + 3.60 % in accordance with the loan agreement.

(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.

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

2 unchanged sentences

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

(8) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the fourth was exercised in June 2023.

In accordance with exercising the fourth one-year extension option, we repaid $ 142.0 million of principal and the variable interest rate increased from LIBOR + 2.16 % to LIBOR + 2.61 %.

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

1 unchanged sentence

(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 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.

During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by certain of our hotels.

The Company determined that all of the forbearance and other agreements evaluated

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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 that was amortized was approximately $ 420,000 and $ 888,000 , respectively, for the three and six months ended June 30, 2023.

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

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

Convertible Senior Notes

5 unchanged sentences

The Convertible Senior Notes will mature on June 1, 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.

For the three and six months ended June 30, 2023, the Company recorded coupon interest expense of $ 970,000 and $ 1.9 million, respectively.

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

For the three and six months ended June 30, 2023, the Company recorded discount amortization of $ 146,000 and $ 290,000 , respectively, related to the initial purchase discount, with the remaining discount balance to be amortized through June 2026.

For the three and six months ended June 30, 2022, the discount amortization was $ 139,000 and $ 271,000 , respectively.

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.

1 unchanged sentence

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.

Effective June 30, 2023, LIBOR is no longer published.

Accordingly all variable interest rate mortgage loans held by the Company that used the LIBOR index transitioned to SOFR beginning on July 1, 2023.

Not all lenders will execute loan amendment documents and instead will defer to original loan documents that dictate changes in index rates.

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

As of June 30, 2023, we were in compliance with all covenants.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Derivative Instruments

4 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

Interest rate caps:

2 unchanged sentences

Strike rate high end of range 5.25 % 4.00 %

Effective date range January 2023 February 2022

Termination date range January 2024 February 2024

Effective date range January 2023 - June 2023 February 2022-May 2022

Termination date range October 2023 - June 2024 May 2023- February 2024

Total cost of interest rate caps (in thousands) $ 3,400 $ 1,145

1 unchanged sentence

(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:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Notional amount (in thousands) $ 816,680 $ 960,500

1 unchanged sentence

Strike rate high end of range 5.25 % 4.50 %

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

Termination date range August 2023 - January 2025 January 2023- January 2025

Aggregate principal balance on corresponding mortgage loans (in thousands) $ 816,680 $ 959,000

3 unchanged sentences

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

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

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:

The holder can choose to exercise the warrants 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 June 30, 2023, no warrants have been exercised.

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

three -year contractual term;

13 unchanged sentences

Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair value measurements based on valuation techniques that use significant inputs that are unobservable.

1 unchanged sentence

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 rose 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/SOFR 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 (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.

2 unchanged sentences

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

In determining the fair values of our derivatives at 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.

In determining the fair values of our derivatives at June 30, 2023, the SOFR interest rate forward curve (Level 2 inputs) assumed a downtrend from 5.141 % to 3.686 % for the remaining term of our derivatives.

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

5 unchanged sentences

(Level 3) Total

March 31, 2023

June 30, 2023

Derivative assets:

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Gain (Loss) Recognized in Income

Three Months Ended March 31,

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

2023 2022 2023 2022

Derivative assets:

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Unrealized gain (loss) on derivatives $ ( 1,253 ) (1)

$ ( 3,454 ) (1)

Realized gain (loss) on interest rate caps 2,282 (1) (2)

— 4,149 (1) (2)

Net $ 1,029 $ 1,208 $ 695 $ 1,616

6 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Value Estimated

38 unchanged sentences

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

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

We estimated the fair value of the total indebtedness to be approximately 92.2 % to 101.9 % of the carrying value of $ 1.1 billion at June 30, 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.

1 unchanged sentence

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 March 31,

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

2023 2022 2023 2022

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

11 unchanged sentences

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

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

Dividends on preferred stock - Series E (inclusive of deemed dividends) — 2,053 — 3,452

4 unchanged sentences

Effect of assumed exercise of warrants — — — 1

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

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

10 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

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

30 unchanged sentences

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

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

As of June 30, 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.

6 unchanged sentences

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 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.

In March 2023, the Company granted approximately 353,000 Performance LTIP units, representing 200 % of the target, with an initial grant date fair value of $ 3.86 per share and a vesting period of approximately three years.

During the second quarter, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements as of June 30, 2023.

The 2023 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 $ 4.07 per share.

On May 10, 2023, approximately 45,000 LTIP units were issued to independent directors, with a fair value of approximately $ 182,000 , which vested immediately upon grant and have been expensed during the three and six months ended June 30, 2023.

As of June 30, 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 614,000 LTIP units and 1.2 million Performance LTIP units issued from March 2015 to May 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

June 30, 2023 December 31, 2022

Redeemable noncontrolling interests in Braemar OP (in thousands) $ 35,174 $ 40,555

4 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership $ 925 $ ( 846 ) $ 664 $ ( 1,813 )

7 unchanged sentences

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 March 31,

Common stock dividends declared $ 3,334 $ 720

On May 12, 2023, the Company received a Notice of Redemption with respect to 32,500 vested common units, and such redemption was settled in cash at the Company’s election for approximately $ 123,000 .

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 June 30, Six Months Ended June 30,

2023 2022 2023 2022

Common stock dividends declared $ 3,335 $ 720 $ 6,669 $ 1,440

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 2023, approximately 45,000 shares of common stock were issued to independent directors with a fair value of approximately $ 182,000 , which vested immediately upon grant and have been expensed during the three and six months ended June 30, 2023.

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.

5 unchanged sentences

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.

During the second quarter, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements as of June 30, 2023.

The 2023 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 $ 1.6 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 March 31,

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

2023 2022 2023 2022

Series D Cumulative Preferred Stock $ 825 $ 825 $ 1,650 $ 1,650

1 unchanged sentence

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

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 .

During the six months ended June 30, 2023, we repurchased 3.9 million shares of our common stock for approximately $ 18.9 million.

As of June 30, 2023, the Company has completed the $ 25.0 million repurchase authorization .

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Redeemable Preferred Stock

5 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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

11 unchanged sentences

The following table summarizes dividends declared (in thousands):

Three Months Ended March 31,

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

2023 2022 2023 2022

Series B Convertible Preferred Stock $ 1,058 $ 1,058 $ 2,116 $ 2,116

1 unchanged sentence

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 at a price of $ 25.00 per share.

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

On February 21, 2023, the Company announced the closing of its Series E Preferred Stock offering.

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”).

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

3 unchanged sentences

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

events constituting a change of control.

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

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

12 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Series E Preferred Stock shares issued (1)

— 1,312 3,798 2,789

Net proceeds $ — $ 29,518 $ 85,444 $ 62,754

1 unchanged sentence

(1) Exclusive of shares issued under the DRIP.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Series E Preferred Stock $ 379,403 $ 291,076

2 unchanged sentences

(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 March 31,

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

2023 2022 2023 2022

Series E Preferred Stock $ 7,986 $ 2,053 $ 15,520 $ 3,452

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Series E Preferred Stock shares redeemed 21 2 32 2

2 unchanged sentences

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 at a price of $ 25.00 per share (or “Stated Value”).

Pursuant to such equity distribution agreements, the Company offered 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”).

On February 21, 2023, the Company announced the closing of its Series M Preferred Stock offering.

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.

3 unchanged sentences

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).

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

dividends (with no redemption fee).

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

5 unchanged sentences

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 and on each one-year anniversary thereafter for such share

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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 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.

3 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Series M Preferred Stock shares issued (1)

— 334 531 367

Net proceeds $ — $ 8,087 $ 12,869 $ 8,897

6 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Series M Preferred Stock $ 48,405 $ 35,182

3 unchanged sentences

(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 March 31,

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

2023 2022 2023 2022

Series M Preferred Stock $ 1,008 $ 128 $ 1,941 $ 149

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Series M Preferred Stock shares redeemed 4 — 5 —

Redemption amount, net of redemption fees $ 90 $ — $ 115 $ —

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Related Party Transactions

15 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Advisory services fee

1 unchanged sentence

Reimbursable expenses (1)

2,042 1,173 4,064 2,269

Equity-based compensation (2)

2,506 2,637 4,792 4,947

Incentive fee — ( 731 ) — 246

2 unchanged sentences

(2) Equity-based compensation is associated with equity grants of Braemar’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Pursuant to the Company’s hotel management agreements with each hotel management company, the Company bears the economic burden for casualty insurance coverage.

8 unchanged sentences

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

allocated share of the office space rental.

The annual fee is equal to the lesser of (i) 20 bps of the average daily balance of the funds managed by the Advisor and (ii) the actual rate of return realized by the cash management strategies;

provided that in no event will the cash management fee be less than zero.

The fee is payable monthly in arrears.

As of June 30, 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 allocated share of the office space rental.

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

10 unchanged sentences

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.

In June 2023, we entered into various 12-month agreements with Lismore to seek modifications or refinancings of certain mortgage debt of the Company.

For the three and six months ended June 30, 2023, we incurred fees of approximately $ 150,000 to Lismore in nonrefundable work fees.

The unamortized fees are included in “other assets” on the condensed consolidated balance sheet, and are amortized on a straight line basis over the term of the agreement.

In addition to the fees described above, we incurred fees from Lismore or its subsidiaries of $ 98,000 for both three and six months ended June 30, 2023 and $ 0 and $ 637,000 for the three and six months ended June 30, 2022.

Ashford Securities

1 unchanged sentence

(“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 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”).

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

resulting ratio of contributions among the Parties, the “Initial True-up Ratio”).

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

10 unchanged sentences

$ 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.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of June 30, 2023, Braemar has funded approximately $ 17.9 million.

As of June 30, 2023, Braemar has a pre-funded balance of approximately $ 1.9 million that is included in “other assets” and approximately $ 1.5 million that is included in “due to Ashford Inc., net” 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 March 31,

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

Line Item 2023 2022 2023 2022

1 unchanged sentence

Design and Construction 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.

Premier Project Management LLC (“Premier”), 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:

7 unchanged sentences

Hotel Management Services

At March 31, 2023, Remington Hotels managed four of our 16 hotel properties.

At June 30, 2023, Remington Hospitality 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 March 31, 2023, 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 June 30, 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.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Licensing Fees —In conjunction with the Mr.

C Beverly Hills Hotel acquisition on August 5, 2021, we entered into an Intellectual Property Sublease Agreement, which allows us to continue to use certain proprietary marks associated with the Mr.

C Beverly Hills Hotel acquisition on August 5, 2021, we entered into an Intellectual Property Sublicense Agreement, which allows us to continue to use certain proprietary marks associated with the Mr.

C brand name.

3 unchanged sentences

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

The agreement expires on August 5, 2023.

The agreement expired on August 5, 2023.

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

Three Months Ended March 31,

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

Line Item 2023 2022 2023 2022

Other hotel expenses $ 172 $ 189 $ 374 $ 291

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.

Management Fees —Under hotel management agreements for our hotel properties existing at June 30, 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.

2 unchanged sentences

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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:

5 unchanged sentences

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

In May 2023 the trial court requested additional briefing from the parties to determine whether the case should be maintained, dismissed, or the class de-certified.

The trial court set a due date of August 7, 2023 for the briefs.

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.

As of June 30, 2023, no amounts have been accrued.

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

To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims:

employment matters, tax matters and matters relating to compliance with applicable law (for example, the ADA and similar state laws).

employment matters, tax matters and matters relating to compliance with applicable law (for example, the Americans with Disability Act and similar state laws).

The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature.

7 unchanged sentences

Direct hotel investments refers to owning hotel properties through either acquisition or new development.

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

We report operating results of direct hotel

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

and its territories.

Subsequent Events

On July 31, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with Braemar OP (the “Borrower”), the lenders party thereto (the “Lenders”) and Bank of America, N.A., as administrative agent and L/C Issuer (as defined in the Credit Agreement).

Bank of America, N.A.

acted as administrative agent and lead arranger on the transaction.

Syndicate bank participants include TBK Bank and MidFirst Bank.

The Credit Agreement evidences a $ 200 million senior secured credit facility (the “Facility”) comprised of a senior secured term loan facility of $ 150 million (the “Term Loan Facility”) and a senior secured revolving credit facility of $ 50 million (the “Revolving Credit Facility”).

Upon satisfaction of certain conditions, including the addition of new Borrowing Base Properties (as defined in the Credit Agreement), the Facility may be increased to a size of not more than $ 400 million in the aggregate.

The maximum availability under the Facility is determined on a quarterly basis and limited to the lesser of (i) $ 200 million (subject to increase of up to $ 400 million in the aggregate);

(ii) 55 % of the appraised value of all Borrowing Base Properties;

and (iii) the DSC Amount (as defined below).

The initial Borrowing Base Properties include the Company’s Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville hotel properties (the “Initial Borrowing Base Properties”).

The “DSC Amount” means the maximum principal amount that can be supported from the Adjusted NOI (as defined in the Credit Agreement) from the Borrowing Base Properties assuming (i) a 30-year amortization and an interest rate which is the greater of (a) the ten (10) year U.S.

Treasury Rate plus 2.50 % and (b) 7.50 %;

and (ii) a minimum debt service coverage of 1.75 to 1.00.

The proceeds of the Term Loan Facility were used to repay the mortgage debt associated with The Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville, which will serve as the Initial Borrowing Base Properties for the financing.

In addition, at closing, the Company drew down approximately $ 46 million under the Revolving Credit Facility.

The Facility is a three-year interest-only facility with all outstanding principal due at maturity, with a one-year extension option, subject to the satisfaction of certain conditions including the payment of an Extension Fee (as defined in the Credit Agreement) equal to 20 basis points ( 0.20 %) of the outstanding Facility amount.

The Credit Agreement is guaranteed by the Company, the Borrower and certain other eligible subsidiaries of the Company and secured by:

(i) perfected lien mortgages or deeds of trust and security interests in the Borrowing Base Properties (as defined in the Credit Agreement);

(ii) assignments of leases and rents with respect to the Borrowing Base Properties;

(iii) assignments of all management agreements, franchise agreements, licenses and other material agreements relating to the Borrowing Base Properties;

(iv) perfected first priority liens on all reserve accounts and all operating accounts related to each Borrowing Base Property;

and (v) perfected first priority liens on and security interests in each subsidiary guarantor owning a Borrowing Base Property.

Borrowings under the Credit Agreement will bear interest at Daily SOFR or Term SOFR plus 10 basis points (with a 0 % floor) plus the applicable margin.

Depending on the Company’s Net Debt to EBITDA ratio, the applicable margin for SOFR ranges from 2.25 % to 3.00 %.

Default interest would accrue at the applicable rate plus 2.0 %.

The Facility contains customary terms, covenants, negative covenants, events of default, limitations and other conditions for credit facilities of this type.

Subject to certain exceptions, the Company and the Borrower are subject to restrictions on incurring additional indebtedness and liens, investments, mergers and fundamental changes, sales or other dispositions of property, dividends and stock redemptions, changes in the nature of the Borrower’s business, transactions with affiliates and burdensome agreements.

Financial covenants are generally based on the financial condition and results of operations of the Company and its consolidated subsidiaries and include, among others, the following:

(i) a Consolidated Leverage Ratio (i.e., Consolidated Net Debt to the Consolidated Total Asset Value) of not more than 55 %;

(ii) a Consolidated Fixed Charge Coverage Ratio (FCCR) (i.e., the ratio of Consolidated Adjusted EBITDA to Consolidated Fixed Charges) of not less than (i) prior to December 31, 2024, 1.1 to 1.0 and (ii) thereafter, 1.25 to 1.0.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Credit Agreement includes customary events of default, and the occurrence of an event of default will permit the Lenders to terminate commitments to lend under the Credit Agreement and accelerate payments of all amounts outstanding thereunder.

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