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Item 1A. Risk Factors

2024-03-14 compared with 2023-03-10 · 106 added, 130 removed, 854 unchanged (22% of the section changed)

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• general volatility of the capital markets and the market price of our common and preferred stock;

• catastrophic events or geopolitical conditions, such as the conflict between Russia and Ukraine and the more recent Israel-Hamas war;

• availability, terms and deployment of capital;

• unanticipated increases in financing and other costs, including a rise in interest rates;

• unanticipated increases in financing and other costs, including changes in interest rates;

• availability of qualified personnel to our advisor;

• 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), Stirling Inc.

and our executive officers and our non-independent directors;

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

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Any economic recession will likely have an adverse effect on our business, operating results and prospects.

Economic conditions in the United States could have a material adverse impact on our earnings and financial condition.

Our business could be adversely affected by unstable economic and political conditions within the United States and foreign jurisdictions and geopolitical conflicts, such as the conflict between Russia and Ukraine and the more recent Israel-Hamas war.

Because economic conditions in the United States may affect demand within the hospitality industry, current and future economic conditions in the United States, including slower growth, stock market volatility and recession fears, could have a material adverse impact on our earnings and financial condition.

Economic conditions may be affected by numerous factors, including but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, changes in currency exchange rates, uncertainty about government fiscal and tax policy, geopolitical events, the regulatory environment and the availability of credit and interest rates.

Our cash, cash equivalents and investments could be adversely affected if the financial institutions in which we hold our cash, cash equivalents and investments fail.

We regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) insurance limit.

The FDIC took control and was appointed receiver of Silicon Valley Bank, New York Signature Bank and First Republic Bank on March 10, 2023, March 12, 2023 and May 1, 2023, respectively.

The Company does not have any direct exposure to Silicon Valley Bank, New York Signature Bank or First Republic Bank.

However, if other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.

We did not pay dividends on our common stock in fiscal years 2020 and 2021 and we may not pay dividends on our common stock or preferred stock in the future.

The board of directors declared cash dividends on the Company’s 5.5% Series B Cumulative Convertible Preferred Stock, 8.25% Series D Cumulative Preferred Stock, Series E Redeemable Preferred Stock and Series M Redeemable Preferred Stock for the quarters ending March 30, 2022, June 30, 2022, September 30, 2022, December 31, 2022 and March 31, 2023 in amounts that such holders of our preferred stock are entitled to receive.

The board of directors declared cash dividends on the Company’s 5.5% Series B Cumulative Convertible Preferred Stock, 8.25% Series D Cumulative Preferred Stock, Series E Redeemable Preferred Stock and Series M Redeemable Preferred Stock for each quarter of 2022 and 2023 in amounts that such holders of our preferred stock are entitled to receive.

We did not pay dividends on our common stock in fiscal years 2020 and 2021.

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On December 8, 2022, our board of directors increased the quarterly cash dividend from $0.01 per diluted share to $0.05 per diluted share beginning with the Company’s common stock dividend for the fourth quarter of 2022 and approved the Company’s dividend policy for 2023.

The Company expects to pay a quarterly cash dividend of $0.05 per share for the Company’s common stock for 2023, or $0.20 per share on an annualized basis.

The Company paid a quarterly cash dividend of $0.05 per share for the Company’s common stock for 2023, or $0.20 per share on an annualized basis.

The approval of our dividend policy does not commit our board of directors to declare future dividends with respect to any quantity or the amount thereof and the board of directors may decide not to pay any dividends on our common stock and/or preferred stock.

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We are required to make minimum base advisory fee payments to our advisor, Ashford Inc., under our advisory agreement, which must be paid even if our total market capitalization and performance decline.

Similarly, we are required to make minimum base hotel management fee payments under our hotel management agreements with Remington Hotels, a subsidiary of Ashford Inc., which must be paid even if revenues at our hotels decline significantly.

Similarly, we are required to make minimum base hotel management fee payments under our hotel management agreements with Remington Hospitality, a subsidiary of Ashford Inc., which must be paid even if revenues at our hotels decline significantly.

Pursuant to the advisory agreement between us and our advisor, we must pay our advisor on a monthly basis a base advisory fee (based on our total market capitalization), subject to a minimum base advisory fee.

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

Similarly, pursuant to our hotel management agreement with Remington Hotels, a subsidiary of Ashford Inc., we pay Remington Hotels monthly base hotel management fees on a per hotel basis equal to the greater of approximately $16,000 per

hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues.

As a result, even if revenues at our hotels decline significantly, we will still be required to make minimum monthly payments to Remington Hotels equal to approximately $16,000 per hotel (increased annually based on consumer price index adjustments), which could adversely impact our liquidity and financial condition.

Similarly, pursuant to our hotel management agreement with Remington Hospitality, a subsidiary of Ashford Inc., we pay Remington Hospitality monthly base hotel management fees on a per hotel basis equal to the greater of approximately $17,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues.

As a result, even if revenues at our hotels decline significantly, we will still be required to make minimum monthly payments to Remington Hospitality equal to approximately $17,000 per hotel (increased annually based on consumer price index adjustments), which could adversely impact our liquidity and financial condition.

Our business is significantly influenced by the economies and other conditions in the specific markets in which we operate, particularly in the metropolitan areas where we have high concentrations of hotels.

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Stockton, Alex Rose, Deric S.

Eubanks, Mark L.

Nunneley, and J.

Eubanks, Justin Coe, and J.

Robison Hays III, and the extent and nature of the relationships they have developed with hotel franchisors, operators, and owners and hotel lending and other financial institutions are critically important to the success of our business.

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For additional information, see the risk factor “We are required to make minimum base advisory fee payments to our advisor, Ashford Inc., under our advisory agreement, which must be paid even if our total market capitalization and performance decline.

Our business strategy depends on acquiring additional hotel properties on attractive terms and the failure to do so or to otherwise manage our planned growth successfully may adversely affect our business and operating results.

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If we do identify an appropriate acquisition candidate, we may not be able to successfully negotiate the terms of the acquisition.

In addition, we expect to finance future acquisitions through a combination of the use of retained cash flows, property-level debt, and offerings of equity and debt securities, which may result in additional leverage or dilution to our stockholders.

stockholders.

Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate and integrate such acquisitions could materially impede our growth.

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Franchisors or managers may also require us to make certain capital improvements to maintain the hotel in accordance with system standards, the cost of which can be substantial.

A franchisor or manager could condition the continuation of branding and operational support based on the completion of capital improvements that Ashford LLC or our board of directors determines is not economically feasible in light of general economic conditions, the operating results or prospects of the affected hotel or other circumstances.

A franchisor or manager could condition the continuation of branding and operational support based on the completion of capital improvements

that Ashford LLC or our board of directors determines is not economically feasible in light of general economic conditions, the operating results or prospects of the affected hotel or other circumstances.

In that event, Ashford LLC or our board of directors may elect to allow the franchise or management agreement to lapse or be terminated, which could result in a termination charge as well as a change in branding or operation of the hotel as an independent hotel.

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We do not have any employees, and rely on our hotel managers to employ the personnel required to operate the hotels we own.

As a result, we have less ability to reduce staffing at our hotels than we would if we employed such personnel directly.

As a result, we cannot control staffing at our hotels.

Additionally, our reliance on third-party hotel managers to operate our hotels and for a substantial majority of our cash flow may adversely affect us.

We do not have any employees.

We contractually engage hotel managers, such as Marriott (or its affiliates), Hilton (or its affiliates), Four Seasons, Hyatt, Accor and our affiliate, Remington Hotels, which is owned by Ashford Inc., to operate, and to employ the personnel required to operate, our hotels.

We contractually engage hotel managers, such as Marriott (or its affiliates), Hilton (or its affiliates), Four Seasons, Hyatt, Accor and our affiliate, Remington Hospitality, which is owned by Ashford Inc., to operate, and to employ the personnel required to operate, our hotels.

Each hotel manager is required under the applicable hotel management agreement to determine appropriate staffing levels;

and we are required to reimburse the applicable hotel manager for the cost of these employees.

As a result, we are dependent on our hotel managers to make appropriate staffing decisions and to appropriately reduce staffing when market conditions are poor, and have less ability to reduce staffing at our hotels than we would if we employed such personnel directly.

As a result, we are dependent on our hotel managers to make appropriate staffing decisions and to appropriately reduce staffing when market conditions are poor, and we cannot reduce staffing at our hotels as we would if we employed such personnel directly.

As a result, our hotels may be staffed at a level higher than we would choose if we employed the personnel required to operate the hotels.

In addition, we may be less likely to take aggressive actions (such as delaying payments owed to our hotel managers) in order to influence the staffing decisions made by Remington Hotels, which is our affiliate.

Additionally, because U.S.

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We are parties to hotel management agreements under which unaffiliated third-party hotel managers manage our hotels.

We have also entered into a master hotel management agreement with Remington Hotels, a subsidiary of Ashford Inc., pursuant to which Remington Hotels currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and Mr.

C Beverly Hills Hotel.

We have also entered into a master hotel management agreement with Remington Hospitality, a subsidiary of Ashford Inc., pursuant to which Remington Hospitality currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and the Cameo Beverly Hills.

We do not supervise any of the hotel managers or their respective personnel on a day-to-day basis.

Without such supervision, our hotel managers may not manage our properties in a manner that is consistent with their respective obligations under the applicable management agreement or our obligations under our hotel management agreements, which are similar to franchise agreements, be negligent in their performance, engage in criminal or fraudulent activity, or otherwise default on their respective management obligations to us.

If any of these events occur, our relationships with any managers may be damaged, we may be in breach of our management agreement, and we could incur liabilities resulting from loss or injury to our property or to persons at our properties.

In addition, from time to time, disputes may arise between us and our third-party managers regarding their performance or compliance with the terms of the hotel management agreements, which in turn could adversely affect us.

From time to time, disputes may arise between us and our third-party managers regarding their performance or compliance with the terms of the hotel management agreements, which in turn could adversely affect us and we could incur liabilities resulting from loss or injury to our property or to persons at our properties.

If we are unable to resolve such disputes through discussions and negotiations, we may choose to terminate our management agreement, litigate the dispute or submit the matter to third-party dispute resolution, the expense of which may be material and the outcome of which may harm our business, operating results or prospects.

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

On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York County, seeking a declaratory judgment that no breach had occurred.

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

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

On July 20, 2020, Accor filed an Amended Answer and Counterclaims against Ashford TRS Chicago II.

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

Arbitration occurred on October 12 and 13, 2022.

The arbitrator returned his decision on November 21, 2022, and the decision did not result in any additional amounts being owed to, or payable by, the Company.

Our management agreements could adversely affect our ability to sell or finance our hotel properties.

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For example, the terms of a management agreement may restrict our ability to sell a property unless the purchaser is not a competitor of the manager, assumes the management agreement and meets other conditions.

terms of a long-term management agreement encumbering our property may reduce the value of the property.

Also, the terms of a long-term management agreement encumbering our property may reduce the value of the property.

When we enter into or acquire properties subject to any such management agreements, we may be precluded from taking actions that we believe to be in our best interest and could incur substantial expense as a result.

Nine of our hotels currently operate under Marriott or Hilton brands;

Ten of our hotels currently operate under Marriott or Hilton brands;

therefore, we are subject to risks associated with concentrating our portfolio in just two brand families.

Nine of our 16 hotels utilize brands owned by Marriott (or its affiliates) or Hilton (or its affiliates).

Ten of our 16 hotels utilize brands owned by Marriott (or its affiliates) or Hilton (or its affiliates).

As a result, our success is dependent in part on the continued success of Marriott and Hilton and their respective brands (or the brands of their affiliates).

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As part of our business strategy, we may acquire hotels that meet our investment criteria and are located in international markets.

We may have difficulty managing our expansion into new geographic markets where we have limited knowledge and understanding of the local economy, an absence of business relationships in the area, or unfamiliarity with local governmental

and permitting procedures and regulations.

There are risks inherent in conducting business outside of the United States, which include risks related to:

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dollars can result in an increase or decrease in the amount of our revenues or earnings.

We are increasingly dependent on information technology, and potential cyber-attacks, security problems or other disruption and expanding social media vehicles present new risks.

We are increasingly dependent on information technology, and cyber-attacks, security problems or other disruption and expanding social media vehicles present new risks.

Ashford LLC and our hotel managers rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personal identifying information, reservations, billing and operating data.

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We depend upon the secure transmission of this information over public networks.

Ashford LLC’s and hotel managers’ networks and storage applications could be subject to unauthorized access by hackers or others through cyber-attacks, which are rapidly evolving and becoming increasingly sophisticated, or by other means, or may be breached due to operator error, malfeasance or other system

Privacy and information security risks have generally increased in recent years because of the proliferation of new technologies, such as ransomware, and the increased sophistication and activities of perpetrators of cyber-attacks.

During the quarter ended September 30, 2023, we had a cyber incident that resulted in the potential exposure of certain employee personal information.

We have completed an investigation and have identified certain employee information that may have been exposed, but we have not identified that any customer information was exposed.

All systems have been restored.

Privacy and information security risks have generally increased in recent years because of the proliferation of new

technologies, such as ransomware, and the increased sophistication and activities of perpetrators of cyber-attacks.

Further, there has been a surge in widespread cyber-attacks during and since the COVID-19 pandemic, and the use of remote work environments and virtual platforms may increase our risk of cyber-attack or data security breaches.

In light of the increased risks, including due to the increased remote access associated with work-from-home arrangements as a result of the COVID-19 pandemic.

Ashford LLC has dedicated additional resources on our behalf to strengthen the security of our computer systems.

In light of the increased risks, including due to the increased remote access associated with work-from-home arrangements as a result of the COVID-19 pandemic, Ashford LLC has dedicated additional resources on our behalf to strengthen the security of our computer systems.

In the future, Ashford LLC may expend additional resources on our behalf to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.

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Negative publicity regarding claims or judgments made against us or involving our hotels may damage our, or our hotels’, reputations.

In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our

insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors.

In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors.

A class action lawsuit has been filed against one of the Company’s hotel management companies alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company.

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• increase the risk that we could be forced to liquidate assets to repay debt.

Increases in interest rates could increase our debt payments.

Higher interest rates have increased our debt payments and such debt payments may remain high.

As of December 31, 2023, we had approximately $1.2 billion of outstanding indebtedness, including approximately $1.1 billion of variable interest rate debt, and we expect to incur additional indebtedness, including additional variable-rate debt.

Increases in interest rates increase our interest costs on our variable-rate debt and could increase interest expense on any future fixed rate debt we may incur, and interest we pay reduces our cash available for distributions, expansion, working capital and other uses.

Higher interest rates in the past few years have negatively impacted nearly all commercial real estate managers, including the Company.

Higher interest rates have increased our interest costs on our variable-rate debt and could increase interest expense on any future fixed rate debt we may incur, and interest we pay reduces our cash available for distributions, expansion, working capital and other uses.

Moreover, periods of rising interest rates heighten the risks described immediately above under “We have a significant amount of debt, and our organizational documents have no limitation on the amount of additional indebtedness that we may incur in the future.”

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We cannot assure you that our hedging strategy and the instruments that we use will not adequately offset the risk of interest rate volatility or other risks or that our hedging transactions will not result in losses that may reduce the overall return on your investment.

We may be adversely affected by changes in LIBOR or SOFR reporting practices, the method in which LIBOR or SOFR is determined or the transition away from LIBOR to SOFR or other alternative reference rates.

In July 2017, the United Kingdom regulator that regulates London Interbank Offered Rate (“LIBOR”) announced its intention to phase out LIBOR rates by the end of 2021.

On March 5, 2021, the ICE Benchmark Administration Limited, the administrator of LIBOR, and the Financial Conduct Authority announced that all LIBOR rates will either cease to be published by any benchmark administrator, or no longer be representative immediately after December 31, 2021 for all GBP, EUR, CHF and JPY LIBOR rates and one-week and two-month U.S.

dollar LIBOR rates, and immediately after June 30, 2023 for the remaining U.S.

dollar LIBOR rates.

As of January 1, 2022, publication of one-week and two-month U.S.

dollar LIBOR has ceased, and regulated U.S.

financial institutions are no longer permitted to enter into new contracts referencing any LIBOR rates.

The Alternative Reference Rates Committee (“ARRC”), a committee convened by the Federal Reserve Board and the New York Federal Reserve Bank, has proposed replacing U.S.

dollar LIBOR with a new index based on trading in overnight repurchase agreements, the Secured Overnight Financing Rate (“SOFR”).

The ARRC has formally announced and recommended SOFR as an alternative reference rate to LIBOR.

As of December 31, 2022, we had approximately $1.3 billion of variable interest rate debt as well as interest rate derivatives including caps on the majority of our variable rate debt that are indexed to LIBOR.

The methodology of calculating SOFR is different to that of LIBOR, as SOFR is calculated using short-term repurchase agreements backed by U.S.

Treasury securities and is backward looking, while LIBOR is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.

In addition since SOFR is a secured rate backed by government securities, it does not take into account bank credit risk (as is the case with LIBOR).

SOFR also may be more volatile than LIBOR.

In July 2021, the ARRC formally recommended the use of forward-looking term rates based on SOFR published by CME Group (the “Term SOFR”) on commercial loans.

While Term SOFR matches more closely the term structure and forward-looking features of LIBOR, as a calculation based on a secured overnight financing rate it still does not match the credit risk-sensitive nature of LIBOR as an unsecured term rate.

At this time, there is no guarantee that such transition from LIBOR to SOFR will not result in financial market disruptions.

Our financial instruments may require changes to documentation as well as enhancements and modifications to systems, controls, procedures and models, which could present operational and legal challenges for us and our clients, customers, investors and counterparties.

There can be no assurance that we will be able to modify all existing financial instruments before the discontinuation of LIBOR.

If such financial instruments are not remediated to provide a method for transitioning from LIBOR to an alternative reference rate, the New York state LIBOR legislation and proposed federal legislation related to the LIBOR transition may provide statutory solutions to implement an alternative reference rate and provide legal protection against litigation.

Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating results and cash flows.

We continue to monitor developments in the LIBOR transition and the proposed federal legislation related to the LIBOR transition to facilitate an orderly transition away from the use of LIBOR.

Risks Related to Conflicts of Interest

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As a result of our affiliations with Ashford Trust, Ashford Inc.

and its subsidiaries (including Ashford LLC, Remington Hotels and Premier), the terms, including fees and other amounts payable, of agreements between us and Ashford Trust, Ashford LLC or Remington Hotels, including our master hotel management agreement and hotel management MEA with Remington Hotels and our master project management agreement and project management MEA with Premier, may not be as favorable to us as the terms under an arm’s-length agreement.

Furthermore, we

may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with Ashford Trust and Ashford LLC.

and its subsidiaries (including Ashford LLC, Remington Hospitality and Premier), the terms, including fees and other amounts payable, of agreements between us and Ashford Trust, Ashford LLC or Remington Hospitality, including our master hotel management agreement and hotel management MEA with Remington Hospitality and our master project management agreement and project management MEA with Premier, may not be as favorable to us as the terms under an arm’s-length agreement.

Furthermore, we may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with Ashford Trust and Ashford LLC.

Ashford LLC may also manage other entities or assets in the future.

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however, our board will have only ten business days to make a determination with respect to such opportunity prior to it being available to Ashford Trust.

The above mentioned dual responsibilities may create conflicts of interest for our officers that could result in decisions or allocations of investments that may benefit Ashford Trust more than they benefit our company, and Ashford Trust may compete with us with respect to certain investments that we may want to acquire.

The above mentioned dual responsibilities may create conflicts of interest for our officers that could result in decisions or allocations of investments that

may benefit Ashford Trust more than they benefit our company, and Ashford Trust may compete with us with respect to certain investments that we may want to acquire.

Ashford LLC and its employees, some of whom are our executive officers, face competing demands relating to their time and this may adversely affect our operations.

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There can be no assurance that Ashford Securities will continue to be successful in helping us to raise capital.

Conflicts of interest with Remington Hotels and Premier, each of which is a subsidiary of Ashford Inc., could result in our management acting other than in our stockholders’ best interest.

Remington Hotels, a subsidiary of Ashford Inc., currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and Mr.

C Beverly Hills Hotel.

We expect Remington Hotels will manage certain of the hotels we acquire in the future.

Conflicts of interest with Remington Hospitality and Premier, each of which is a subsidiary of Ashford Inc., could result in our management acting other than in our stockholders’ best interest.

Remington Hospitality, a subsidiary of Ashford Inc., currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and Cameo Beverly Hills.

We expect Remington Hospitality will manage certain of the hotels we acquire in the future.

Premier, also a subsidiary of Ashford Inc., currently provides design and construction services to us.

We expect Premier will also provide design and construction services to us in the future.

Conflicts of interest in general and specifically relating to Remington Hotels and Premier may lead to management decisions that are not in our stockholders’ best interest.

Conflicts of interest in general and specifically relating to Remington Hospitality and Premier may lead to management decisions that are not in our stockholders’ best interest.

Bennett and Mr.

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include 360,000 shares owned by trusts.

We have entered into a hotel management MEA and a master hotel management agreement with Remington Hotels and a project management MEA and master project management agreement with Premier.

To the extent we have the right or control the right to direct such matters, the hotel management MEA requires us to engage Remington Hotels to provide, under the master hotel management agreement, hotel management services for all future properties that we acquire, unless our independent directors either (i) unanimously vote not to hire Remington Hotels, or (ii) based on special circumstances or past performance, by a majority vote, elect not to engage Remington Hotels because they have determined, in their reasonable business judgment, that it would be in our best interest not to engage Remington Hotels or that another manager or developer could perform the duties materially better.

The project management MEA and master project management agreement with Premier contains similar provisions.

We have entered into a hotel management MEA and a master hotel management agreement with Remington Hospitality and a project management MEA and master project management agreement with Premier.

To the extent we have the right or control the right to direct such matters, the hotel management MEA requires us to engage Remington Hospitality to provide, under the master hotel management agreement, hotel management services for all future properties that we acquire, unless our independent directors either (i) unanimously vote not to hire Remington Hospitality, or (ii) based on special circumstances or past performance, by a majority vote, elect not to engage Remington Hospitality because they have determined, in their reasonable business judgment, that it would be in our best interest not to engage Remington Hospitality or that another manager or developer could perform the duties materially better.

The project management MEA and master project management

agreement with Premier contains similar provisions.

A beneficial owner of a significant position in Ashford Inc.

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reduce the time and effort he spends overseeing our company.

Our board of directors has adopted a policy that requires all material approvals, actions or decisions which we have the right to make under the master hotel management agreement with Remington Hotels and the master project management agreement with Premier be approved by a majority or, in certain circumstances, all, of our independent directors.

However, given the authority and/or operational latitude provided to Remington Hotels under the master hotel management agreement and to Premier under the master project management agreement, Mr.

Our board of directors has adopted a policy that requires all material approvals, actions or decisions which we have the right to make under the master hotel management agreement with Remington Hospitality and the master project management agreement with Premier be approved by a majority or, in certain circumstances, all, of our independent directors.

However, given the authority and/or operational latitude provided to Remington Hospitality under the master hotel management agreement and to Premier under the master project management agreement, Mr.

Bennett, as the chairman and chief executive officer of Ashford Inc., could take actions or make decisions that are not in our stockholders’ best interest or that are otherwise inconsistent with his obligations to us under the master hotel management agreement or our obligations under the applicable franchise agreements or his obligations to us under the master project management agreement.

Ashford Inc.’s ability to exercise significant influence over the determination of the competitive set for any hotels managed by Remington Hotels could artificially enhance the perception of the performance of a hotel, making it more difficult to use managers other than Remington Hotels for future properties.

Under our master hotel management agreement with Remington Hotels, we have the right to terminate Remington Hotels based on the performance of the applicable hotel, subject to the payment of a termination fee.

Ashford Inc.’s ability to exercise significant influence over the determination of the competitive set for any hotels managed by Remington Hospitality could artificially enhance the perception of the performance of a hotel, making it more difficult to use managers other than Remington Hospitality for future properties.

Under our master hotel management agreement with Remington Hospitality, we have the right to terminate Remington Hospitality based on the performance of the applicable hotel, subject to the payment of a termination fee.

The determination of performance is based on the applicable hotel’s gross operating profit margin and its RevPAR penetration index, which provides the relative revenue per room generated by a specified property as compared to its competitive set.

For each hotel managed by Remington Hotels, its competitive set consists of a small group of hotels in the relevant market that we and Remington Hotels believe are comparable for purposes of benchmarking the performance of such hotel.

For each hotel managed by Remington Hospitality, its competitive set consists of a small group of hotels in the relevant market that we and Remington Hospitality believe are comparable for purposes of benchmarking the performance of such hotel.

has significant influence over the determination of the competitive set for any of our hotels that it manages.

could artificially enhance the perception of the performance of a hotel by selecting a competitive set that is not performing well or is not comparable to the Remington Hotels-managed hotel, thereby making it more difficult for us to elect not to use Remington Hotels for future hotel management.

Remington Hotels may be able to pursue lodging investment opportunities that compete with us.

Pursuant to the terms of our hotel management MEA with Remington Hotels, if investment opportunities that satisfy our investment criteria are identified by Remington Hotels or its affiliates, Remington Hotels will give us a written notice and description of the investment opportunity.

could artificially enhance the perception of the performance of a hotel by selecting a competitive set that is not performing well or is not comparable to the Remington Hospitality-managed hotel, thereby making it more difficult for us to elect not to use Remington Hospitality for future hotel management.

Remington Hospitality may be able to pursue lodging investment opportunities that compete with us.

Pursuant to the terms of our hotel management MEA with Remington Hospitality, if investment opportunities that satisfy our investment criteria are identified by Remington Hospitality or its affiliates, Remington Hospitality will give us a written notice and description of the investment opportunity.

We will have 10 business days to either accept or reject the investment opportunity.

If we reject the opportunity, Remington Hotels may then pursue such investment opportunity, subject to a right of first refusal in favor of Ashford Trust pursuant to an existing agreement between Ashford Trust and Remington Hotels, on materially the same terms and conditions as offered to us.

If we reject such an investment opportunity, either Ashford Trust or Remington Hotels could pursue the opportunity and compete with us.

If we reject the opportunity, Remington Hospitality may then pursue such investment opportunity, subject to a right of first refusal in favor of Ashford Trust pursuant to an existing agreement between Ashford Trust and Remington Hospitality, on materially the same terms and conditions as offered to us.

If we reject such an investment opportunity, either Ashford Trust or Remington Hospitality could pursue the opportunity and compete with us.

In such a case, Mr.

Bennett, chairman of our board, in his capacity as chairman and chief executive officer of Ashford Trust could be in a position of directly competing with us, and Remington Hotels may compete with us with respect to certain investments that we may want to acquire.

Bennett, chairman of our board, in his capacity as chairman and chief executive officer of Ashford Trust could be in a position of directly competing with us, and Remington Hospitality may compete with us with respect to certain investments that we may want to acquire.

Our fiduciary duties as the general partner of our operating partnership could create conflicts of interest, which may impede business decisions that could benefit our stockholders.

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Our conflicts of interest policy may not adequately address all of the conflicts of interest that may arise with respect to our activities.

We have adopted a conflicts of interest policy to address specifically some of the conflicts relating to our activities which requires the approval of a majority of our disinterested directors to approve any transaction, agreement or relationship in which any of our directors or officers, Ashford LLC or its employees or Ashford Trust has an interest.

has an interest.

In connection with this policy, our board of directors has established a Related Party Transactions Committee (consisting of Messrs.

Vaziri and Rinaldi and

Vaziri and Rinaldi and Ms.

Carter), which is empowered to deny a new proposed interested party transaction or recommend the transaction for approval by a majority of the independent directors.

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Particularly following periods of volatility in the overall market or declines in the market price of the company’s securities, REITs, including us have been targets of stockholder litigation, stockholder director nominations and stockholder proposals by dissident stockholders that allege conflicts of interest in business dealings with affiliated and related persons and entities.

Our relationships with Ashford LLC, Ashford Inc., Ashford Trust, the other businesses and entities to which Ashford LLC and Ashford Inc.

Our relationships with Ashford LLC, Ashford Inc., Ashford Trust, Stirling Inc., the other businesses and entities to which Ashford LLC and Ashford Inc.

provide management or other services, Mr.

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In addition to general economic conditions, new hotel room supply is an important factor that can affect the lodging industry’s performance, and overbuilding has the potential to further exacerbate the negative impact of an economic recession.

Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth.

Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply

An adverse change in lodging fundamentals could result in returns that are substantially below our expectations or result in losses, which could have a material adverse effect on our business and operating results.

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As Internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from our management companies.

some of these Internet travel intermediaries are attempting to offer hotel rooms as a commodity, by increasing the importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification.

Moreover, some of these Internet travel intermediaries are attempting to offer hotel rooms as a commodity, by increasing the importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification.

These intermediaries hope that consumers will eventually develop brand loyalties to their reservations system rather than to the brands under which our properties are franchised.

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We are subject to risks associated with the employment of hotel personnel, particularly with respect to hotels that employ unionized labor.

Our managers, including Remington Hotels, a subsidiary of Ashford Inc., and unaffiliated third-party managers are responsible for hiring and maintaining the labor force at each of our hotels.

Our managers, including Remington Hospitality and unaffiliated third-party managers, are responsible for hiring and maintaining the labor force at each of our hotels.

Although we do not directly employ or manage employees at our hotels, we still are subject to many of the costs and risks generally associated with the hotel labor force, particularly at those hotels with unionized labor.

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Furthermore, labor agreements may limit the ability of our hotel managers to reduce the size of hotel workforces during an economic downturn because collective bargaining agreements are negotiated between the hotel managers and labor unions.

Our ability, if any, to have any material impact on the outcome of these negotiations is restricted by and dependent on the individual management agreement covering a specific property, and we may have little ability to control the outcome of these negotiations.

Our ability, if any, to

have any material impact on the outcome of these negotiations is restricted by and dependent on the individual management agreement covering a specific property, and we may have little ability to control the outcome of these negotiations.

In addition, changes in labor laws may negatively impact us.

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Our environmental insurance policies may not provide sufficient coverage for any environmental liabilities at our properties.

In addition, if environmental liabilities are discovered during the underwriting of the insurance policies for any property that we acquire in the future, we may be unable to obtain insurance coverage for the liabilities at commercially reasonable rates or at all.

In addition, if environmental liabilities are discovered during the underwriting of the insurance policies for any

property that we acquire in the future, we may be unable to obtain insurance coverage for the liabilities at commercially reasonable rates or at all.

We may experience losses as a result of any of these events.

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Such changes may put us at a competitive disadvantage compared to some of our major competitors, to the extent we are unable to pass the tax costs through to our customers.

The Biden administration has announced in 2021 and 2022, and in certain cases has enacted, a number of tax proposals to fund new government investments in infrastructure, healthcare, and education, among other things.

Certain of these proposals involve an increase in the domestic corporate tax rate, which if implemented could have a material impact on our future results of operations and cash flows.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, with tax

provisions primarily focused on implementing a 15% corporate alternative minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases.

The IRA also creates a number of potentially beneficial tax credits to incentivize investments in certain technologies and industries.

Certain provisions of the IRA will become effective beginning in fiscal 2023.

We do not believe the IRA will have a material negative impact on our business.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, with tax provisions primarily focused on implementing a 15% corporate alternative minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases.

The IRA also created a number of potentially beneficial tax credits to incentivize investments in certain technologies and industries.

Certain provisions of the IRA became effective in fiscal 2023 and the Treasury Department and IRS have announced their intentions to continue to release and finalize regulations and other guidance implementing the IRA in fiscal 2024.

The IRA has not had a material negative impact on our business.

Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.

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Subject to the terms of any outstanding classes or series of preferred stock, these actions can be taken without obtaining stockholder approval.

Our issuance of additional classes of common stock or preferred stock could have the effect of delaying or preventing someone from taking control of us, even if our stockholders believe that a change in control was in their best interests.

of additional classes of common stock or preferred stock could have the effect of delaying or preventing someone from taking control of us, even if our stockholders believe that a change in control was in their best interests.

Certain provisions in the partnership agreement for our operating partnership may delay or prevent unsolicited acquisitions of us.

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Our common stock and preferred stock issuances could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our stockholders’ best interests.

Maryland statutory law provides that an act of a director relating to or affecting an acquisition or a potential acquisition of control of a corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director.

Maryland statutory law provides that an act (or determination not to act) of a director relating to or affecting an acquisition or a potential acquisition of control of a corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director.

Hence, directors of a Maryland corporation by statute are not required to act in certain takeover situations under the same standards of care, and are not subject to the same standards of review, as apply in Delaware and other corporate jurisdictions.

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Our charter opts out of the business combination/moratorium and control share provisions of the MGCL.

Our charter also prevents us from making any elections under Subtitle 8 of the MGCL unless approved by our stockholders by a majority of the votes cast.

Through a provision unrelated to Subtitle 8, our charter provides that directors may only be removed for cause and by the vote of a majority of the stockholders.

Because the opt outs from the business combination/moratorium and control share provisions of the MGCL are contained in our charter, they cannot be amended unless the board of directors recommends the amendment and the stockholders approve the amendment.

Additionally, our board of directors has adopted a resolution that makes an election prohibiting us from making any of the elections permitted by Subtitle 8 unless such election is first approved by a stockholder vote.

Our board of directors can take many actions without stockholder approval.

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In addition, our charter eliminates our directors’ and officers’ liability to us and our stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or a judgment of active and deliberate dishonesty that was material to the cause of action.

Our charter requires us to indemnify our directors and officers and to advance expenses prior to the final disposition of a proceeding to the maximum extent permitted by Maryland law for liability actually incurred in connection with any proceeding to which they may be made, or threatened to be made, a party, except to the extent that the act or omission of the director or officer was material to the matter giving rise to the proceeding and was either committed in bad faith or was the result of active and deliberate dishonesty, the director or officer actually received an improper personal benefit in money, property or services, or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law.

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As of March 12, 2024, we had 66,520,711 shares of our common stock issued and outstanding, 3,078,017 shares of our Series B Cumulative Convertible Preferred Stock, 1,600,000 shares of our Series D Cumulative Preferred Stock, 16,159,670 shares of our Series E Redeemable Preferred Stock and 1,774,180 shares of our Series M Redeemable Preferred Stock.

We also have also authorized 10,000,000 shares of our Series C Preferred Stock, 28,000,000 shares of our Series E Preferred Stock and 28,000,000 shares of our Series M Preferred Stock.

No shares of Series C Preferred Stock are issued.

Our charter allows us to

create new series of preferred stock at any time.

We have also classified 10,000,000 shares of our authorized preferred stock as Series C Preferred Stock.

As of March 12, 2024, no shares of Series C Preferred Stock are issued and outstanding.

Our charter allows us to create new series of preferred stock at any time.

Accordingly, we may issue up to an additional 183,479,289 shares of common stock and 57,388,133 shares of preferred stock.

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federal income tax at regular corporate rates;

• we could be subject to the federal alternative minimum tax for the taxable years beginning before January 1, 2018, and possibly increased state and local income taxes;

• we could be subject to increased state and local income taxes;

• unless we are entitled to relief under certain U.S.

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The changes enacted include the taxation of modified gross receipts (as opposed to net taxable income), the suspension of and/or limitation on the use of net operating loss deductions, increases in tax rates and fees, the addition of surcharges, and the taxation of our partnership income at the entity level.

Facing mounting budget deficits, more state and local taxing

authorities have indicated that they are going to revise their income tax regimes in this fashion and/or eliminate certain federally allowed tax deductions such as the REIT dividends paid deduction.

Facing mounting budget deficits, more state and local taxing authorities have indicated that they are going to revise their income tax regimes in this fashion and/or eliminate certain federally allowed tax deductions such as the REIT dividends paid deduction.

Failure to make required distributions would subject us to U.S.

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In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation.

The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

Finally the 100% excise tax also applies to the underpricing of services by a TRS to its parent REIT in contexts where the services are unrelated to services for REIT tenants.

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Moreover, the IRS may impose excise taxes and penalties based on transactions that occurred prior to the spin-off.

If our hotel managers, including Ashford Hospitality Services LLC and its subsidiaries (including Remington Hotels) do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.

If our hotel managers, including Ashford Hospitality Services LLC and its subsidiaries (including Remington Hospitality) do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.

Rent paid by a lessee that is a “related party tenant” of ours will not be qualifying income for purposes of the two gross income tests applicable to REITs.

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federal income tax purposes, unless certain relief provisions applied.

If our hotel managers, including Ashford Hospitality Services LLC (“AHS”) and its subsidiaries (including Remington Hotels), do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.

If our hotel managers, including Ashford Hospitality Services LLC (“AHS”) and its subsidiaries (including Remington Hospitality), do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.

Each of the hotel management companies that enters into a management contract with our TRS lessees must qualify as an “eligible independent contractor” under the REIT rules in order for the rent paid to us by our TRS lessees to be qualifying income for our REIT income test requirements.

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Although we intend to monitor ownership of our shares by our hotel managers and their owners, it is possible that these ownership levels could be exceeded.

Additionally, we and AHS and its subsidiaries, including Remington Hotels, must comply with the provisions of the private letter ruling we obtained from the IRS in connection with Ashford Inc.’s acquisition of Remington Hotels to ensure that AHS and its subsidiaries, including Remington Hotels, continue to qualify as “eligible independent contractors.”

Additionally, we and AHS and its subsidiaries, including Remington Hospitality, must comply with the provisions of the private letter ruling we obtained from the IRS in connection with Ashford Inc.’s acquisition of Remington Hospitality to ensure that AHS and its subsidiaries, including Remington Hospitality, continue to qualify as “eligible independent contractors.”

Complying with REIT requirements may cause us to forego otherwise attractive opportunities.

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The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.

In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs and no more than 25% of the value of our total assets can be represented by certain publicly offered REIT debt instruments.

by securities of one or more TRSs and no more than 25% of the value of our total assets can be represented by certain publicly offered REIT debt instruments.

If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences.

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From time to time, we may generate taxable income greater than our net income for financial reporting purposes or our taxable income may be greater than our cash flow available for distribution to stockholders.

If we do not have other funds available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices, or find another

alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year.

If we do not have other funds available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices, or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year.

These alternatives could increase our costs or reduce the value of our equity.

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We may in the future choose to pay taxable dividends in our common stock instead of cash, in which case stockholders may sell our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.

We may distribute taxable dividends that are payable in cash and common stock at the election of each stockholder subject to certain limitations, including that the cash portion be at least 20% of the total distribution (10% for distributions declared on or after November 1, 2021, and on or before June 30, 2022).

If we make a taxable dividend payable in cash and common stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits, as determined for U.S.

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Declines in the values of our investments may make it more difficult for us to maintain our qualification as a REIT or exemption from the Investment Company Act.

If the market value or income potential of real estate-related investments declines as a result of increased interest rates or other factors, we may need to increase our real estate-related investments and income or liquidate our non-qualifying assets in order to maintain our REIT qualification or exemption from the Investment Company Act of 1940 (the “Investment Company Act”).

If the market value or income potential of real estate-related investments declines as a result of changes in interest rates or other factors, we may need to increase our real estate-related investments and income or liquidate our non-qualifying assets in order to maintain our REIT qualification or exemption from the Investment Company Act of 1940 (the “Investment Company Act”).

If the decline in real estate asset values and/or income occurs quickly, this may be especially difficult to accomplish.

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Preferred stock and preferred units, if issued, could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability to make a distribution to the holders of our common stock.

Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings.

Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we

cannot predict or estimate the amount, timing, or nature of our future offerings.

Thus, our stockholders bear the risk of our future offerings reducing the market price of our securities and diluting their securities holdings in us.

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So long as the holders of common units retain significant ownership in us and are able to sell such shares in the public markets, the market price of our common stock may be adversely affected.

Moreover, the existence of shares of our common stock reserved for issuance as restricted shares or upon exchange of options or redemption of common units may adversely

affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

Moreover, the existence of shares of our common stock reserved for issuance as restricted shares or upon exchange of options or redemption of common units may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

Any future sales by us of our common stock or securities convertible into common stock may be dilutive to existing stockholders.

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If we curtail our repurchase program, our stock price may be negatively affected.

Unresolved Staff Comments

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-K

Item 1A. Risk Factors