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Item 2. Management’s Discussion and Analysis

2023-08-07 compared with 2023-05-08 · 389 added, 131 removed, 428 unchanged (55% of the section changed)

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

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

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

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains registered trademarks that are the exclusive property of their respective owners, which are companies other than us, including Marriott International®, Hilton Worldwide®, Sofitel®, Hyatt® and Accor®.

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• actual and potential conflicts of interest with Ashford Trust, Ashford Inc.

and its subsidiaries (including Ashford LLC, Remington Hotels and Premier) and our executive officers and our non-independent director;

and its subsidiaries (including Ashford LLC, Remington Hospitality and Premier) and our executive officers and our non-independent director;

• changes in personnel of Ashford LLC or the lack of availability of qualified personnel;

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

As of March 31, 2023, we owned interests in 16 hotel properties in seven states, the District of Columbia, Puerto Rico and St.

As of June 30, 2023, we owned interests in 16 hotel properties in seven states, the District of Columbia, Puerto Rico and St.

Virgin Islands with 4,192 total rooms, or 3,957 net rooms, excluding those attributable to our joint venture partner.

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

As of March 31, 2023, Remington Hotels, a subsidiary of Ashford Inc., managed four of our 16 hotel properties.

As of June 30, 2023, Remington Hospitality , a subsidiary of Ashford Inc., managed four of our 16 hotel properties.

Third-party management companies managed the remaining hotel properties.

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and, together with Mr.

Archie Bennett, Jr., as of March 31, 2023, owned approximately 610,261 shares of Ashford Inc.

Archie Bennett, Jr., as of June 30, 2023, owned approximately 610,261 shares of Ashford Inc.

common stock, which represented an approximate 19.0% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc.

Series D Convertible Preferred Stock, which, along with all unpaid accrued and accumulated dividends thereon, was convertible (at a conversion price of $117.50 per share) into an additional approximate 4,151,054 shares of Ashford Inc.

common stock, which if converted as of March 31, 2023

common stock, which if converted as of June 30, 2023

would have increased the Bennetts’ ownership interest in Ashford Inc.

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include 360,000 shares owned by trusts.

As of March 31, 2023, Mr.

As of June 30, 2023, Mr.

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

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Recent Developments

On December 7, 2022, our board of directors approved a new 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 $25 million.

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.

On January 18, 2023, the Company paid 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.

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

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.

Additionally, based on information previously reported by Mr.

Bennett in a Form 4 filed on March 1, 2023, Mr.

Bennett subsequently sold 417,491 shares of common stock beneficially owned by him into the public markets.

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.

On April 4, 2023, the Company amended the mortgage loan secured by The Ritz-Carlton Sarasota.

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.

The Company paid Lismore approximately $98,000 for the successful execution of The Ritz-Carlton Sarasota loan modification and extension.

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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.

On June 13, 2023, the Company finalized an extension of its $435 million mortgage loan secured by four properties:

The Notary Hotel, The Clancy, Sofitel Chicago Magnificent Mile, and Marriott Seattle Waterfront.

The loan is being extended beyond its original initial maturity in June 2023 for an additional twelve months.

In conjunction with the extension, the Company paid down $142 million of the loan utilizing corporate cash on hand, which reduced the balance to approximately $293 million.

As part of the extension the Company also purchased an interest rate cap through June 2024 with a strike rate of 4.69%.

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.

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.

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.

On August 1, 2023 the Company announced the rebranding and planned conversion of its Mr.

C Beverly Hills Hotel in Los Angeles, California to the Cameo Beverly Hills.

Effective August 4, 2023, Cameo Beverly Hills became available for booking on Hilton’s website at hilton.com and joined Hilton Honors, Hilton’s award-winning guest loyalty program.

Following an extensive renovation, which is expected to be completed by the end of 2025, the hotel will join LXR Hotels & Resorts (“LXR”).

One of Hilton’s iconic luxury brands, LXR is a collection of unique, independent luxury properties around the world that focuses on individualized service and one-of-a-kind stays.

The conversion of the hotel, which was built in 1965, will reflect its unique history and distinctive location in the heart of West Los Angeles near iconic amenities and high-end shopping on Rodeo Drive.

The Company is planning an approximately $25 million renovation to further elevate this distinctive hotel that will enable a revitalized luxury guest experience when it is completed.

Added amenities and enhanced design elements will include upgrades to the guestrooms, guest bathrooms, restaurant, lobby, pool, fitness area, and meeting spaces.

Remington Hospitality will continue to manage the hotel after the conversion under a management agreement.

On August 4, 2023, the board of directors of the Company approved amendments to the Company’s Fourth Amended and Restated Bylaws, as amended.

See Part II, Item 5 for a description of the amendments.

Key Indicators of Operating Performance

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 (in thousands except percentages):

Three Months Ended March 31, Favorable (Unfavorable)

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The following table summarizes changes in key line items from our condensed consolidated statements of operations for three months ended June 30, 2023 and 2022 (in thousands except percentages):

Three Months Ended June 30, Favorable (Unfavorable)

2023 2022 $ Change % Change

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Other 21,794 20,098 1,696 8.4

Total revenue 186,707 174,894 11,813 6.8

Hotel operating expenses:

Rooms 26,705 24,134 (2,571) (10.7)

Food and beverage 36,365 31,894 (4,471) (14.0)

Other expenses 56,297 52,087 (4,210) (8.1)

Management fees 5,880 5,538 (342) (6.2)

Total hotel operating expenses 125,247 113,653 (11,594) (10.2)

Property taxes, insurance and other 9,396 5,277 (4,119) (78.1)

Depreciation and amortization 22,567 19,571 (2,996) (15.3)

Advisory services fee 8,215 6,305 (1,910) (30.3)

(Gain) loss on legal settlements — (114) (114) (100.0)

Corporate general and administrative 3,896 3,438 (458) (13.3)

Total expenses 169,321 148,130 (21,191) (14.3)

Operating income (loss) 17,386 26,764 (9,378) (35.0)

Equity in earnings (loss) of unconsolidated entity (75) (74) (1) (1.4)

Interest income 2,295 162 2,133 1,316.7

Interest expense and amortization of loan costs (23,600) (10,281) (13,319) (129.5)

Write-off of loan costs and exit fees (248) (22) (226) (1,027.3)

Realized and unrealized gain (loss) on derivatives 1,029 1,208 (179) (14.8)

Income (loss) before income taxes (3,213) 17,757 (20,970) (118.1)

Income tax (expense) benefit 75 (1,077) 1,152 107.0

Net income (loss) (3,138) 16,680 (19,818) (118.8)

(Income) loss attributable to noncontrolling interest in consolidated entities 367 (1,468) 1,835 125.0

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership 925 (846) 1,771 209.3

Net income (loss) attributable to the Company $ (1,846) $ 14,366 $ (16,212) (112.8) %

All hotel properties owned for the three months ended June 30, 2023 and 2022 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended June 30, 2023 and 2022.

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

The following acquisition affects reporting comparability related to our condensed consolidated financial statements:

Hotel Property Location Type Date

Four Seasons Resort Scottsdale Scottsdale, Arizona Acquisition December 1, 2022

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

Three Months Ended June 30,

Occupancy 70.91 % 71.15 %

ADR (average daily rate) $ 430.68 $ 435.24

RevPAR (revenue per available room) $ 305.39 $ 309.68

Rooms revenue (in thousands) $ 117,137 $ 112,527

Total hotel revenue (in thousands) $ 186,707 $ 174,894

The following table illustrates the key performance indicators of the 15 hotel properties that were owned for the full three months ended June 30, 2023 and 2022:

Three Months Ended June 30,

Occupancy 72.08 % 71.15 %

ADR (average daily rate) $ 415.76 $ 435.24

RevPAR (revenue per available room) $ 299.66 $ 309.68

Rooms revenue (in thousands) $ 109,213 $ 112,527

Total hotel revenue (in thousands) $ 171,471 $ 174,894

Net Income (Loss) Attributable to the Company.

Net income (loss) attributable to the Company changed $16.2 million, from net income of $14.4 million for the three months ended June 30, 2022 (the “2022 quarter”) to net a loss of $1.8 million for the three months ended June 30, 2023 (the “2023 quarter”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue increased $4.6 million, or 4.1%, to $117.1 million during the 2023 quarter compared to the 2022 quarter.

During the 2023 quarter, we experienced a 24 basis point decrease in occupancy and a 1.0% decrease in room rates.

Fluctuations in rooms revenue between the 2023 quarter and the 2022 quarter are a result of the changes in occupancy and ADR between the 2023 quarter and the 2022 quarter as reflected in the table below (dollars in thousands):

Hotel Property Favorable (Unfavorable)

Rooms Revenue Occupancy

(change in bps) ADR (change in %)

Capital Hilton (1)

$ 1,713 620 8.7 %

Marriott Seattle Waterfront (2)

2,606 2,162 4.0 %

The Notary Hotel 1,485 847 9.2 %

The Clancy (1,536) (396) (11.3) %

Sofitel Chicago Magnificent Mile 196 28 2.2 %

Pier House Resort & Spa (1,111) (323) (12.0) %

The Ritz-Carlton St.

Thomas (2,167) (748) (5.6) %

Park Hyatt Beaver Creek Resort & Spa (441) (1,096) 5.3 %

Hotel Yountville (1,055) (277) (20.9) %

The Ritz-Carlton Sarasota (1)

(3,229) (2,244) 0.8 %

Hilton La Jolla Torrey Pines (396) (317) (1.5) %

Bardessono Hotel and Spa (938) 101 (17.6) %

The Ritz-Carlton Lake Tahoe 729 778 2.6 %

C Beverly Hills Hotel (113) 65 (4.1) %

The Ritz-Carlton Reserve Dorado Beach 941 (169) 10.7 %

Total $ (3,316) 93 (4.5) %

Non-comparable

Four Seasons Resort Scottsdale $ 7,924 n/a n/a

(1) This hotel was under renovation during the 2023 quarter.

(2) This hotel was under renovation during the 2022 quarter.

Food and Beverage Revenue .

Food and beverage revenue increased $5.5 million, or 13.0%, to $47.8 million during the 2023 quarter compared to the 2022 quarter.

This increase is attributable to an aggregate increase of $4.2 million at five comparable hotel properties and an increase of $5.3 million from the acquisition of the Four Seasons Resort Scottsdale on December 1, 2022.

These increases were partially offset by an aggregate decrease of $3.9 million at The Clancy, Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, The Ritz-Carlton St.

Thomas, Park Hyatt Beaver Creek Resort & Spa, Hotel Yountville, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, Bardessono Hotel and Spa and Mr.

C Beverly Hills Hotel.

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $1.7 million, or 8.4%, to $21.8 million during the 2023 quarter compared to the 2022 quarter.

This increase is attributable to an aggregate increase in other hotel revenue of $1.3 million at ten comparable hotel properties and an increase of $2.0 million at the Four Seasons Resort Scottsdale, partially offset by an aggregate decrease of $1.6 million at the Capital Hilton, Pier House Resort & Spa, The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota and Hilton La Jolla Torrey Pines.

Rooms Expense .

Rooms expense increased $2.6 million, or 10.7%, to $26.7 million in the 2023 quarter compared to the 2022 quarter.

This increase is primarily attributable to an aggregate increase of $1.9 million at eight comparable hotel properties and an increase of $1.9 million at the Four Seasons Resort Scottsdale, partially offset by a decrease of $1.2 million at the Pier House Resort & Spa, The Ritz-Carlton St.

Thomas, Hotel Yountville, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, Bardessono Hotel and Spa and The Ritz-Carlton Reserve Dorado Beach.

Food and Beverage Expense .

Food and beverage expense increased $4.5 million, or 14.0%, to $36.4 million during the 2023 quarter compared to the 2022 quarter.

This increase is attributable to an aggregate increase of $2.1 million at seven comparable hotel properties and an increase of $3.7 million at the Four Seasons Resort Scottsdale, partially offset by a decrease of $1.4 million at the Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, Park Hyatt Beaver Creek Resort & Spa, Hotel Yountville, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, The Ritz-Carlton Lake Tahoe and Mr.

C Beverly Hills Hotel.

Other Operating Expenses .

Other operating expenses increased $4.2 million, or 8.1%, to $56.3 million in the 2023 quarter compared to the 2022 quarter.

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

We experienced an increase of $710,000 in direct expenses and $3.5 million in indirect expenses and incentive management fees in the 2023 quarter as compared to the 2022 quarter.

Direct expenses were 4.3% of total hotel revenue in the 2023 quarter and 4.2% in the 2022 quarter.

The increase in direct expenses includes an increase of approximately $714,000 at the Four Seasons Resort Scottsdale.

The increase in indirect expenses comprises increases in:

(i) general and administrative costs of $1.0 million comprising an increase $1.6 million at the one acquired hotel property offset by a decrease of $652,000 at our 15 comparable hotel properties;

(ii) marketing costs of $2.3 million comprising an increase of $1.2 million at our 15 comparable hotel properties and $1.1 million at the one acquired hotel property;

(iii) repairs and maintenance of $1.2 million, comprising an increase of $493,000 at our 15 comparable hotel properties and $664,000 at one acquired hotel property;

and (iv) energy costs of $704,000 comprising an increase of $428,000 at our 15 comparable hotel properties and $276,000 at the one acquired hotel property.

The increases were partially offset by decreases in (i) incentive management fees of $1.6 million comprising an aggregate decrease of $1.9 million from our 15 comparable hotel properties partially offset by an increase of $232,000 at the one acquired hotel property, and (ii) lease expense of $9,000 at our 15 comparable hotel properties.

Management Fees .

Base management fees increased $342,000, or 6.2%, to $5.9 million in the 2023 quarter compared to the 2022 quarter.

Base management fees increased $408,000 at five comparable hotel properties and $450,000 at the one acquired hotel property, partially offset by an aggregate decrease of $516,000 at the Sofitel Chicago Magnificent Mile, Hilton La Jolla Torrey Pines, Park Hyatt Beaver Creek Resort & Spa, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa, , Mr.

C Beverly Hills Hotel, The Ritz-Carlton St.

Thomas and The Ritz-Carlton Sarasota.

Property Taxes, Insurance and Other .

Property taxes, insurance and other increased $4.1 million, or 78.1%, to $9.4 million in the 2023 quarter compared to the 2022 quarter.

The increase is primarily attributable to an aggregate increase of approximately $3.9 million at 13 comparable hotel properties, including $2.3 million at the Sofitel Chicago Magnificent Mile and $249,000 at the one acquired hotel property.

During the 2022 quarter, we received a real estate assessment reduction for the Sofitel Chicago Magnificent Mile.

These increases were partially offset by an aggregate decrease of $27,000 at The Notary Hotel and The Ritz-Carlton St.

Depreciation and Amortization .

Depreciation and amortization increased $3.0 million, or 15.3%, to $22.6 million in the 2023 quarter compared to the 2022 quarter.

The increase comprised $2.4 million at Four Seasons Resort Scottsdale as a result of its acquisition and an aggregate increase of $1.6 million at nine comparable hotel properties.

These increases were partially offset by an aggregate decrease of $1.0 million at the Sofitel Chicago Magnificent Mile, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa and Mr.

C Beverly Hills Hotel due to fully depreciated assets.

Advisory Services Fee.

Advisory services fee increased $1.9 million, or 30.3%, to $8.2 million in the 2023 quarter compared to the 2022 quarter due to increases in the base advisory fee of $441,000, reimbursable expenses of $869,000, and incentive fee of $731,000 which was due to a credit in the 2022 quarter related to the reversal of the incentive fee, partially offset by a decrease of $131,000 in equity-based compensation.

In the 2023 quarter, we recorded an advisory services fee of $8.2 million, which included a base advisory fee of $3.7 million, reimbursable expenses of $2.0 million, $2.5 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

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

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

Gain on Legal Settlements.

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

There was no such gain during the 2023 quarter.

Corporate General and Administrative .

Corporate general and administrative expense was $3.9 million in the 2023 quarter and $3.4 million in the 2022 quarter.

The increase in corporate general and administrative expense is due to higher reimbursed operating expenses of Ashford Securities of $361,000 and higher miscellaneous expenses of $413,000 partially offset by lower public company costs of $193,000 and lower professional fees of $123,000.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2023 quarter and 2022 quarter, we recorded equity in loss of unconsolidated entity of $75,000 and $74,000, respectively, related to our investment in OpenKey.

Interest Income .

Interest income was $2.3 million and $162,000 in 2023 quarter and 2022 quarter, respectively.

The increase in interest income in the 2023 quarter was primarily attributable to higher short-term interest rates on excess cash and the Company’s cash management agreement with Ashford LLC.

Interest Expense and Amortization of Loan Costs .

Interest expense and amortization of loan costs increased $13.3 million, or 129.5%, to $23.6 million in the 2023 quarter compared to the 2022 quarter.

This increase is primarily due to higher interest expense from higher average interest rates, as well as higher interest expense associated with the mortgage loan secured by the Four Seasons Resort Scottsdale as a result of its acquisition.

The average LIBOR rates for the 2023 quarter and the 2022 quarter were 5.10% and 1.02%, respectively.

The average SOFR rates for the 2023 quarter and the 2022 quarter were 4.74% and 0.67%, respectively.

Write-off of Loan Costs and Exit Fees.

Write-off of loan costs and exit fees was $248,000 in the 2023 quarter, primarily related to various loan modifications.

Write-off of loan costs and exit fees consisted of $137,000 from third parties and $111,000 from Lismore.

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

Realized and Unrealized Gain (Loss) on Derivatives .

Realized and unrealized gain on derivatives of $1.0 million for 2023 quarter consisted of an unrealized gain on warrants of approximately $16,000 and a realized gain of $2.3 million associated with payments received from counterparties on in-the-money interest rate caps.

These gains were partially offset by an unrealized loss on interest rate caps of approximately $1.3 million.

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

Income Tax (Expense) Benefit .

Income tax (expense) benefit changed $1.2 million, from expense of $1.1 million in the 2022 quarter to a benefit of $75,000 in the 2023 quarter.

This change was primarily due to a decrease in the taxable income of certain of our TRS entities in the 2023 quarter compared to the 2022 quarter.

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

Our noncontrolling interest partner in consolidated entities was allocated a loss of $367,000 and income of $1.5 million in the 2023 quarter and the 2022 quarter, respectively.

At both June 30, 2023 and 2022, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

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

Noncontrolling interests in operating partnership were allocated a net loss of $925,000 and net income of $846,000 in the 2023 quarter and the 2022 quarter, respectively.

Redeemable noncontrolling interests in Braemar OP represented ownership interests of 6.63% and 7.59% as of June 30, 2023 and 2022, respectively.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 (in thousands except percentages):

Six Months Ended June 30, Favorable (Unfavorable)

2023 2022 $ Change % Change

Rooms $ 254,664 $ 217,719 $ 36,945 17.0 %

Food and beverage 100,004 78,976 21,028 26.6

Other 47,340 40,079 7,261 18.1

Total hotel revenue 402,008 336,774 65,234 19.4

8 unchanged sentences

Advisory services fee 16,163 13,627 (2,536) (18.6)

(Gain) loss on legal settlements — (114) (114) (100.0)

Corporate general and administrative 6,716 5,933 (783) (13.2)

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Net income (loss) attributable to the Company $ 14,188 $ 29,029 $ (14,841) (51.1) %

All hotel properties owned for the three months ended March 31, 2023 and 2022 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of operating results for certain hotel properties are not comparable for the three months ended March 31, 2023 and 2022.

All hotel properties owned for the six months ended June 30, 2023 and 2022 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of operating results for certain hotel properties are not comparable for the six months ended June 30, 2023 and 2022.

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

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

Hotel Properties Location Type Date

Hotel Property Location Type Date

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

Four Seasons Resort Scottsdale Scottsdale, Arizona Acquisition December 1, 2022

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

Three Months Ended March 31,

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

Six Months Ended June 30,

Occupancy 67.90 % 63.18 %

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Total hotel revenue (in thousands) $ 402,008 $ 336,774

The following table illustrates the key performance indicators of the 14 hotel properties that were included for the full three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

The following table illustrates the key performance indicators of the 14 hotel properties that were owned for the full six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

Occupancy 69.02 % 61.05 %

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Net Income (Loss) Attributable to the Company.

Net income attributable to the Company increased $1.4 million, from $14.7 million for the three months ended March 31, 2022 (the “2022 quarter”), to $16.0 million for the three months ended March 31, 2023 (the “2023 quarter”), as a result of the factors discussed below.

Net income attributable to the Company decreased $14.8 million, from $29.0 million for the six months ended June 30, 2022 (the “2022 period”), to $14.2 million for the six months ended June 30, 2023 (the “2023 period”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue increased $32.3 million, or 30.7%, to $137.5 million during the 2023 quarter compared to the 2022 quarter.

During the 2023 quarter, we experienced a 990 basis point increase in occupancy and a 2.8% increase in room rates compared to the 2022 quarter.

Fluctuations in rooms revenue between 2023 quarter and 2022 quarter are a result of the changes in occupancy and ADR between 2023 quarter and 2022 quarter as reflected in the table below (dollars in thousands):

Rooms revenue increased $36.9 million, or 17.0%, to $254.7 million during the 2023 period compared to the 2022 period.

During the 2023 period, we experienced a 472 basis point increase in occupancy and a 2.1% increase in room rates compared to the 2022 period.

Fluctuations in rooms revenue between the 2023 period and the 2022 period are a result of the changes in occupancy and ADR between the 2023 period and the 2022 period as reflected in the table below (dollars in thousands):

Hotel Property Favorable (Unfavorable)

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The Ritz-Carlton Sarasota (1)

(5,311) (1,267) (3.9) %

Hilton La Jolla Torrey Pines 1,008 272 4.1 %

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Total $ 32,977

(1) This hotel was under renovation during the 2023 quarter.

(2) This hotel was under renovation during the 2022 quarter.

(1) This hotel was under renovation during the 2023 period.

(2) This hotel was under renovation during the 2022 period.

Food and Beverage Revenue .

Food and beverage revenue increased $15.5 million, or 42.3%, to $52.2 million during the 2023 quarter compared to the 2022 quarter.

We experienced an aggregate increase in food and beverage revenue of $6.2 million at nine comparable hotel properties as well as increases of $3.7 million and $6.5 million at The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale, respectively.

These increases are partially offset by an aggregate decrease of approximately $980,000 at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Lake Tahoe, Bardessono Hotel and Spa, Hotel Yountville and Mr.

Food and beverage revenue increased $21.0 million, or 26.6%, to $100.0 million during the 2023 period compared to the 2022 period.

We experienced an aggregate increase in food and beverage revenue of $8.1 million at six comparable hotel properties as well as increases of $4.1 million and $11.8 million at The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale, respectively.

These increases were partially offset by an aggregate decrease of approximately $2.9 million at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota, Pier House Resort & Spa, Bardessono Hotel and Spa, Hotel Yountville, Sofitel Chicago Magnificent Mile, Park Hyatt Beaver Creek Resort & Spa and Mr.

C Beverly Hills Hotel.

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $5.6 million, or 27.9%, to $25.5 million during the 2023 quarter compared to the 2022 quarter.

The increase is attributable to higher other hotel revenue of $1.3 million at ten comparable hotel properties, $2.2 million at The Ritz-Carlton Reserve Dorado Beach and $2.6 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $621,000 at The Ritz-Carlton Sarasota, Pier House Resort & Spa, Bardessono Hotel and Spa, Park Hyatt Beaver Creek Resort & Spa.

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $7.3 million, or 18.1%, to $47.3 million during the 2023 period compared to the 2022 period.

This increase is attributable to higher other hotel revenue of $1.9 million at nine comparable hotel properties, $2.4 million at The Ritz-Carlton Reserve Dorado Beach and $4.7 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $1.7 million at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota, Pier House Resort & Spa, Park Hyatt Beaver Creek Resort & Spa and Capital Hilton.

Rooms Expense .

Rooms expense increased $7.2 million, or 35.5%, to $27.4 million in the 2023 quarter compared to the 2022 quarter.

The increase is attributable to an aggregate increase in rooms expense of $3.4 million at 11 comparable hotel properties, an increase of $1.8 million at The Ritz-Carlton Reserve Dorado Beach and an increase of $2.3 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $294,000 at The Ritz-Carlton St.

Thomas, Pier House Resort & Spa and Bardessono Hotel and Spa.

Rooms expense increased $9.7 million, or 22.0%, to $54.1 million in the 2023 period compared to the 2022 period.

This increase is attributable to an aggregate increase in rooms expense of $5.1 million at nine comparable hotel properties, an increase of $1.6 million at The Ritz-Carlton Reserve Dorado Beach and an increase of $4.2 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $1.1 million at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota, Pier House Resort & Spa, Bardessono Hotel and Spa and Hotel Yountville.

Food and Beverage Expense .

Food and beverage expense increased $11.7 million, or 41.8%, to $39.7 million during the 2023 quarter compared to the 2022 quarter.

The increase is attributable to higher food and beverage expense of $4.2 million at nine comparable hotel properties,$3.4 million at The Ritz-Carlton Reserve Dorado Beach and $4.6 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $488,000 at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Lake Tahoe, Pier House Resort & Spa, Hotel Yountville and Mr.

Food and beverage expense increased $16.2 million, or 27.0%, to $76.1 million during the 2023 period compared to the 2022 period.

This increase is attributable to higher food and beverage expense of $5.4 million at eight comparable hotel properties, $3.7 million at The Ritz-Carlton Reserve Dorado Beach and $8.4 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $1.3 million at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Lake Tahoe, Pier House Resort & Spa, Hotel Yountville, Park Hyatt Beaver Creek Resort & Spa and Mr.

C Beverly Hills Hotel.

Other Operating Expenses .

Other operating expenses increased $16.1 million, or 34.8%, to $62.3 million in the 2023 quarter compared to the 2022 quarter.

Other operating expenses increased $20.3 million, or 20.7%, to $118.6 million in the 2023 period compared to the 2022 period.

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

We experienced an increase of $2.2 million in direct expenses and $13.9 million in indirect expenses and incentive management fees in the 2023 quarter compared to the 2022 quarter.

Direct expenses were 4.2% of total hotel revenue in the 2023 quarter and 4.2% in the 2022 quarter.

The increase in direct expenses is associated with higher direct expenses of approximately $392,000 at ten comparable hotel properties, $1.2 million at The Ritz-Carlton Reserve Dorado Beach and $760,000 at the Four Seasons Resort Scottsdale.

These increases were partially offset by lower direct expenses of $180,000 at the Sofitel Chicago Magnificent Mile, The Ritz-Carlton Sarasota, The Ritz-Carlton St.

Thomas and Mr.

C Beverly Hills Hotel.

We experienced an increase of $2.9 million in direct expenses and $17.4 million in indirect expenses and incentive management fees in the 2023 period compared to the 2022 period.

Direct expenses were 4.3% of total hotel revenue in the 2023 period and 4.2% in the 2022 period.

The increase in direct expenses is associated with higher direct expenses of approximately $732,000 at nine comparable hotel properties, $1.3 million at The Ritz-Carlton Reserve Dorado Beach and $1.5 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by lower direct expenses of $616,000 at the Sofitel Chicago Magnificent Mile, Marriott Seattle Waterfront, Mr.

C Beverly Hills Hotel, The Ritz-Carlton St.

Thomas and The Ritz-Carlton Sarasota.

The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $6.8 million comprising an increase of $2.0 million at our 14 comparable hotel properties and $4.8 million at the two acquired hotel properties;

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(iv) lease expense of $158,000 comprising an increase of $147,000 at our 14 comparable hotel properties and $11,000 at the two acquired hotel properties;

(v) energy costs of $1.6 million comprised of an increase of $571,000 at our 14 comparable hotel properties and $1.0 million at our two acquired hotel properties;

and (vi) incentive management fees of $493,000 comprising an aggregate increase of $1.3 million at the two acquired hotel properties partially offset by an aggregate decrease of $769,000 at our 14 comparable hotel properties.

and (v) energy costs of $2.3 million comprised of an increase of $960,000 at our 14 comparable hotel properties and $1.4 million at our two acquired hotel properties.

These increases in indirect expenses were partially offset by an aggregate decrease of $1.1 million in incentive management fees, comprising of an aggregate decrease of $2.7 million at our 14 comparable hotel properties, offset by an aggregate increase of $1.5 million at the two acquired hotel properties.

Management Fees .

Base management fees increased $2.6 million, or 61.6%, to $6.7 million in the 2023 quarter compared to the 2022 quarter.

Management fees increased approximately $1.7 million at seven comparable hotel properties, $492,000 at The Ritz-Carlton Reserve Dorado Beach and $699,000 at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of $310,000 at the seven remaining comparable hotel properties.

Base management fees increased $2.9 million, or 29.9%, to $12.6 million in the 2023 period compared to the 2022 period.

Management fees increased $1.9 million at seven comparable hotel properties, $537,000 at The Ritz-Carlton Reserve Dorado Beach and $1.2 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of $683,000 at the Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa, Mr.

C Beverly Hills Hotel, The Ritz-Carlton St.

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

Property Taxes, Insurance and Other .

Property taxes, insurance and other decreased $487,000, or 5.7%, to $8.1 million in the 2023 quarter compared to the 2022 quarter.

The decrease primarily resulted from an aggregate decrease of $2.4 million at five hotel properties, including a $2.3 million decrease at the Sofitel Chicago Magnificent Mile due to a lower property tax assessment.

The decrease is partially offset by increases of $419,000 at The Ritz-Carlton Reserve Dorado Beach and $257,000 at the Four Seasons Resort Scottsdale as a result of their acquisitions, as well as an aggregate increase of approximately $1.2 million at Capital Hilton, Hilton La Jolla Torrey Pines, The Clancy, Marriott Seattle Waterfront, Pier House Resort & Spa, Bardessono Hotel and Spa, Hotel Yountville, The Ritz-Carlton Sarasota and The Ritz-Carlton Lake Tahoe.

Property taxes, insurance and other increased $3.6 million, or 26.2%, to $17.5 million in the 2023 period compared to the 2022 period.

This increase is primarily attributable to an aggregate increase of $2.6 million at twelve comparable hotel properties, including $36,000 at the Sofitel Chicago Magnificent Mile, $590,000 at The Ritz-Carlton Reserve Dorado Beach and $506,000 at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $94,000 at The Notary Hotel and The Ritz-Carlton St.

Depreciation and Amortization .

Depreciation and amortization increased $4.1 million, or 22.1%, to $22.5 million for the 2023 quarter compared to the 2022 quarter.

The increase comprised $1.3 million at The Ritz-Carlton Reserve Dorado Beach and $2.3 million at the Four Seasons Resort Scottsdale as a result of their acquisitions as well as an aggregate increase of $1.7 million at eight comparable hotel properties.

These increases were partially offset by an aggregate decrease of $1.2 million at the Marriott Seattle Waterfront, The Clancy, Marriott Seattle Waterfront, Bardessono Hotel and Spa, Hotel Yountville and Mr.

Depreciation and amortization increased $7.1 million, or 18.6%, to $45.1 million for the 2023 period compared to the 2022 period.

This increase is comprised of $1.4 million at The Ritz-Carlton Reserve Dorado Beach, $4.7 million at the Four Seasons Resort Scottsdale and an aggregate increase of $3.3 million at eight comparable hotel properties.

These increases were partially offset by an aggregate decrease of $2.3 million at the Sofitel Chicago Magnificent Mile, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa and Mr.

C Beverly Hills Hotel primarily due to fully depreciated assets.

Advisory Services Fee.

Advisory services fee increased $626,000, or 8.5%, to $7.9 million in the 2023 quarter compared to the 2022 quarter due to increases in the base advisory fee of $701,000, reimbursable expenses of $926,000, partially offset by decreases in equity-based compensation of $24,000 and incentive fee of $977,000.

In the 2023 quarter, we recorded an advisory services fee of $7.9 million, which included a base advisory fee of $3.6 million, reimbursable expenses of $2.0 million and $2.3 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

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

Advisory services fee increased $2.5 million, or 18.6%, to $16.2 million in the 2023 period compared to the 2022 period due to increases in the base advisory fee of $1.1 million, reimbursable expenses of $1.8 million, partially offset by decreases in equity-based compensation of $155,000 and incentive fee of $246,000.

In the 2023 period, we recorded an advisory services fee of $16.2 million, which included a base advisory fee of $7.3 million, reimbursable expenses of $4.1 million and $4.8 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

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

and an incentive fee of $246,000.

Gain on Legal Settlements.

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

There was no such gain during the 2023 period.

Corporate General and Administrative .

Corporate general and administrative expense was $2.8 million in the 2023 quarter compared to $2.5 million in the 2022 quarter.

The increase in corporate general and administrative expenses is primarily due to higher reimbursed operating expenses of Ashford Securities of $667,000, partially offset by lower professional fees of $98,000, public company costs of $213,000 and miscellaneous expenses of $31,000.

Corporate general and administrative expense was $6.7 million in the 2023 period compared to $5.9 million in the 2022 period.

The increase in corporate general and administrative expenses is primarily due to

higher reimbursed operating expenses of Ashford Securities of $1.0 million and higher miscellaneous expenses of $382,000, partially offset by lower professional fees of $221,000 and lower public company costs of $406,000.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2023 quarter and the 2022 quarter, we recorded equity in loss of unconsolidated entity of $73,000 and $72,000, respectively, related to our investment in OpenKey.

In the 2023 period and the 2022 period, we recorded equity in loss of unconsolidated entity of $148,000 and $146,000, respectively, related to our investment in OpenKey.

Interest Income .

Interest income was $2.1 million and $25,000 in the 2023 quarter and the 2022 quarter, respectively.

The increase in interest income in the 2023 quarter was primarily attributable to higher short-term interest rates on excess cash and the Company’s cash management agreement with Ashford LLC.

Interest income was $4.4 million and $187,000 in the 2023 period and the 2022 period, respectively.

The increase in interest income in the 2023 period was primarily attributable to higher short-term interest rates on excess cash and the Company’s cash management agreement with Ashford LLC.

Interest Expense and Amortization of Discounts and Loan Costs .

Interest expense and amortization of discounts and loan costs increased $14.4 million, or 168.4%, to $22.9 million for the 2023 quarter compared to the 2022 quarter.

The increase is primarily due to higher interest expense from a higher average LIBOR/SOFR rate and the mortgage loans associated with The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale.

The average LIBOR rates for the 2023 quarter and the 2022 quarter were 4.62% and 0.23%, respectively.

The average SOFR rates for the 2023 quarter and the 2022 quarter were 4.50% and 0.09%, respectively.

Interest expense and amortization of discounts and loan costs increased $27.7 million, or 147.2%, to $46.5 million for the 2023 period compared to the 2022 period.

The increase is primarily due to higher interest expense from higher average interest rates and the mortgage loan secured by the Four Seasons Resort Scottsdale as a result of its acquisition.

The average LIBOR rates for the 2023 period and the 2022 period were 4.85% and 0.62%, respectively.

The average SOFR rates for the 2023 period and the 2022 period were 4.62% and 0.39%, respectively.

Write-off of Loan Costs and Exit Fees.

Write-off of loan costs and exit fees was $12,000 in the 2023 quarter related to The Ritz-Carlton Lake Tahoe mortgage loan SOFR conversion.

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

Write-off of loan costs and exit fees was $260,000 in the 2023 period related to various loan modifications.

Write-off of loan costs and exit fees consisted of $149,000 from third parties and $111,000 from Lismore.

Write-off of loan costs and exit fees was $98,000 in the 2022 period primarily resulting from third party cost from the refinance of the Park Hyatt Beaver Creek Resort & Spa in February 2022.

Gain (loss) on Extinguishment of Debt.

Gain on extinguishment of debt was $2.3 million in the 2023 quarter due to the payoff of The Ritz-Carlton Reserve Dorado Beach mortgage loan.

Gain on extinguishment of debt was $2.3 million in the 2023 period due to the payoff of The Ritz-Carlton Reserve Dorado Beach mortgage loan.

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

There was no such gain or loss in the 2022 quarter.

There was no such gain or loss in the 2022 period.

Realized and Unrealized Gain (Loss) on Derivatives .

Realized and unrealized loss on derivatives of $334,000 for the 2023 quarter consisted of unrealized loss on interest rate caps of approximately $2.3 million, partially offset by unrealized gain on warrants of approximately $103,000, and a realized gain of $1.9 million associated with payments received from counterparties on interest rate caps.

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

Realized and unrealized gain on derivatives of $695,000 for the 2023 period consisted of unrealized gain on warrants of $119,000 and a realized gain of $4.1 million associated with payments received from counterparties on in-the-money interest rate caps.

These gains were partially offset by an unrealized loss on interest rate caps of approximately $3.6 million.

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

Income Tax (Expense) Benefit .

Income tax expense decreased $282,000, from $2.6 million in the 2022 quarter to $2.3 million in the 2023 quarter.

This decrease was primarily due to a decrease in the taxable income of certain of our TRS entities in the 2023 quarter compared to the 2022 quarter.

Income tax expense decreased $1.4 million, from $3.7 million in the 2022 period to $2.3 million in the 2023 period.

This decrease was primarily due to a decrease in the taxable income of certain of our TRS entities in the 2023 period compared to the 2022 period.

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

Our noncontrolling interest partner in consolidated entities was allocated income of $309,000 and a loss of $26,000 in the 2023 quarter and the 2022 quarter, respectively.

At both March 31, 2023 and 2022, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Our noncontrolling interest partner in consolidated entities was allocated a loss of $58,000 and income of $1.4 million in the 2023 period and the 2022 period, respectively.

At both June 30, 2023 and 2022, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

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

Noncontrolling interests in operating partnership were allocated net income of $261,000 in the 2023 quarter and $967,000 in the 2022 quarter.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 7.47% and 7.84% as of March 31, 2023 and 2022, respectively.

Noncontrolling interests in operating partnership were allocated net loss of $664,000 in the 2023 period and net income of $1.8 million in the 2022 period.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 6.63% and 7.59% as of June 30, 2023 and 2022, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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• capital expenditures to improve our hotel properties.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, capital market activities and existing cash balances.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, capital market activities, our Revolving Credit Facility and existing cash balances.

Pursuant to the advisory agreement between us and our advisor, we must pay our advisor on a monthly basis a base advisory fee, subject to a minimum base advisory fee.

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

As of March 31, 2023, our $435 million mortgage loan was in a cash trap and approximately $440,000 of our restricted cash was subject to this cash trap.

As of March 31, 2023, the Company held cash and cash equivalents of $281.5 million and restricted cash of $63.1 million, the vast majority of which is comprised of lender and manager-held reserves.

As of March 31, 2023, $19.1 million was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs.

At March 31, 2023, our net debt to gross assets was 37.1%.

As of June 30, 2023, our $293.2 million mortgage loan was in a cash trap and approximately $1.1 million of our restricted cash was subject to this cash trap.

As of June 30, 2023, the Company held cash and cash equivalents of $128.0 million and restricted cash of $63.4 million, the vast majority of which is comprised of lender and manager-held reserves.

As of June 30, 2023, $15.4 million was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs.

At June 30, 2023, our net debt to gross assets was 37.3%.

The Company's cash and cash equivalents are primarily comprised of corporate cash invested in short-term U.S.

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Equity Transactions

having an aggregate value of up to $25 million.

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.

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

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We are not required to pay any additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $10,000 structuring fee.

As of May 4, 2023, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $10.0 million under the SEDA.

As of August 3, 2023, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $10.0 million under the SEDA.

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

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

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

The Company and Lincoln Park also entered into a registration rights agreement, pursuant to which the Company agreed to maintain the

effectiveness of the Registration Statement.

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

As of May 4, 2023, 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 .

As of August 3, 2023, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $4.2 million under the Lincoln Park Purchase Agreement .

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

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

As of May 4, 2023, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.

As of August 3, 2023, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.

Debt Transactions

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.