What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-14 compared with 2023-03-10 · 245 added, 221 removed, 431 unchanged (52% of the section changed)

21 unchanged sentences

We own 14 of our hotel properties directly, and the remaining two hotel properties, through an investment in a majority-owned consolidated entity.

We are advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement.

We are advised by Ashford LLC through an advisory agreement.

All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC.

2 unchanged sentences

We do not operate any of our hotel properties directly;

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

As of December 31, 2022, Remington Hotels, a subsidiary of Ashford Inc., managed four of our 16 hotel properties.

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

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

Third-party management companies managed the remaining hotel properties.

3 unchanged sentences

Recent Developments

In September 2022, given the recent increases in interest rates on short-term U.S.

Treasury securities, the independent members of our board of directors approved the engagement of our Advisor to actively manage and invest the Company’s excess cash in short-term U.S.

Treasury securities (the “Cash Management Strategy”).

As consideration for the Advisor’s services under this engagement, the Company will pay the Advisor an annual fee equal to the lesser of (i) 20 basis points (0.20%) of the average daily balance of the Company’s excess cash invested by the Advisor and (ii) the actual rate of return realized by the Cash Management Strategy (the “Cash Management Fee”);

provided that in no event will the Cash Management Fee be less than zero.

The Cash Management Fee will be calculated and payable monthly in arrears.

Investment of the Company’s excess cash pursuant to the Cash Management Strategy commenced in October 2022.

On December 1, 2022, the Company acquired a 100% interest in the 210-room Four Seasons Resort Scottsdale at Troon North for $267.8 million in cash.

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 director’s authorization replaced any previous repurchase authorizations.

During the year ended December 31, 2022, we repurchased 1.5 million shares of our common stock for approximately $6.1 million.

Subsequent to December 31, 2022, the Company repurchased approximately 3.9 million shares of its common stock for approximately $18.9 million.

The Company repurchased approximately 5.4 million shares of its common stock for approximately $25.0 million and has completed the $25.0 million repurchase authorization.

On December 23, 2022, we entered into a $100 million mortgage loan, secured by the Four Seasons Resort Scottsdale at Troon North.

The mortgage loan has a three-year initial term and two one-year extension options, subject to satisfaction of certain conditions.

The mortgage loan is interest only and bears interest at a rate of SOFR + 3.75% with a SOFR floor of 1.00%.

On January 18, 2023, the Company paid off its existing mortgage loan associated with the Ritz-Carlton Reserve Dorado Beach.

Prior to the pay-off, the mortgage loan had an outstanding balance of $54 million.

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 October 31, 2023, the Company amended its mortgage loan secured by The Ritz-Carlton Lake Tahoe.

Terms of the amendment included extending the maturity date by one year to January 2025, with a one-year extension option, amending the interest rate to SOFR + 3.60% and making a pay down of $587,000.

On December 22, 2023, the Company entered into a $110.6 million mortgage loan with Aareal Capital Corporation that is secured by the Capital Hilton in Washington, D.C.

This mortgage loan has an initial maturity date of December 2026 with two one-year extension options, subject to the satisfaction of certain conditions and bears interest at a floating interest rate of SOFR + 3.75%.

On January 3, 2024, the Company extended the mortgage loan secured by the Pier House Resort & Spa in Key West, Florida.

The mortgage loan has an initial maturity date of September 2025 with one one-year extension option, subject to the satisfaction of certain conditions, continues to have a balance of $80.0 million, and bears interest at a floating interest rate of SOFR + 3.60%.

On January 29, 2024, the Company extended the mortgage loan secured by The Ritz-Carlton St.

Thomas in St.

Thomas, USVI.

The mortgage loan has an initial maturity date of August 2025 with one one-year extension option, subject to the satisfaction of certain conditions, continues to have a balance of $42.5 million, and bears interest at a floating interest rate of SOFR + 4.35%.

On February 5, 2024, the Company amended the mortgage loan secured by the Hilton La Jolla Torrey Pines.

It remains encumbered by the original mortgage loan, which now has been partially paid down to a remaining balance of $66.6 million.

While the Company considers its alternatives regarding refinancing the loan or potentially selling the asset, the lender has provided a six month forbearance agreement.

During this time, the mortgage loan bears an annual fixed interest rate of 9.0%.

In February 2024, the Company and Ashford Inc.

approved funding up to an additional $1.0 million, in the aggregate, for OpenKey.

Such funding is to be allocated pro rata among Ashford Inc.

and the Company.

On March 7, 2024, the Company closed on a $62.0 million non-recourse loan secured by the Ritz-Carlton Reserve Dorado Beach.

The mortgage loan has a two-year term, is interest only and provides for a floating interest rate of SOFR + 4.75%.

Key Indicators of Operating Performance

36 unchanged sentences

Short-term supply is also expected to be below long-term averages.

While the industry is expected to have supply growth below historical averages, we may experience supply growth, in certain markets, in excess of national averages that may negatively impact performance.

While the industry is

expected to have supply growth below historical averages, we may experience supply growth, in certain markets, in excess of national averages that may negatively impact performance.

We expect that our ADR, occupancy and RevPAR performance will be impacted by macroeconomic factors such as national and local employment growth, personal income and corporate earnings, GDP, consumer confidence, office vacancy rates and business relocation decisions, airport and other business and leisure travel, new hotel construction, the pricing strategies of competitors and currency fluctuations.

45 unchanged sentences

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

Transaction costs — 563 563 100.0

Corporate general and administrative 13,523 18,084 4,561 25.2

Total expenses 677,670 601,192 (76,478) (12.7)

Gain (loss) on insurance settlement and disposition of assets — 696 (696) (100.0)

Operating income (loss) 61,673 68,393 (6,720) (9.8)

1 unchanged sentence

Interest income 6,401 2,677 3,724 139.1

Other income (expense) 293 — 293

Interest expense and amortization of discounts and loan costs (94,219) (52,166) (42,053) (80.6)

Write-off of loan costs and exit fees (3,489) (146) (3,343) (2,289.7)

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

Realized and unrealized gain (loss) on derivatives (663) 4,961 (5,624) (113.4)

6 unchanged sentences

All hotel properties owned for the years ended December 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, the operating results for certain hotel properties are not comparable for the years ended December 31, 2022 and 2021.

Based on when a hotel property was acquired or disposed of operating results for certain hotel properties are not comparable for the years ended December 31, 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 consolidated financial statements:

Hotel Properties Location Type Date

C Beverly Hills Hotel Los Angeles, California Acquisition August 5, 2021

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:

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

Year Ended December 31,

4 unchanged sentences

Total hotel revenue (in thousands) $ 739,343 $ 669,585

The following table illustrates the key performance indicators of the 13 hotel properties that were included for the full year ended December 31, 2022 and 2021:

The following table illustrates the key performance indicators of the 14 hotel properties that were owned for the full years ended December 31, 2023 and 2022:

Year Ended December 31,

5 unchanged sentences

Net Income (Loss) Attributable to the Company.

Net income (loss) attributable to the Company changed $44.4 million, from a net loss of $26.7 million for the year ended December 31, 2021 (“2021”), to net income of $17.8 million for the year ended December 31, 2022 (“2022”), as a result of the factors discussed below.

Net income (loss) attributable to the Company changed $44.8 million, from net income of $17.8 million for the year ended December 31, 2022 (“2022”), to a net loss of $27.0 million for the year ended December 31, 2023 (“2023”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue increased $33.4 million, or 7.7%, to $464.9 million during 2023 compared to 2022.

During 2022, we experienced a 1,315 basis point increase in occupancy and a 16.8% increase in room rates compared to 2021.

The increase in rooms revenue is due to the hotel properties recovering from the COVID-19 pandemic as well as increases in rooms revenue of $8.9 million from the acquisition of the Mr.

C Beverly Hills Hotel on August 5, 2021, $38.1 million from the acquisition of The Ritz-Carlton Reserve Dorado Beach on March 11, 2022, and $3.1 million from the acquisition of the Four Seasons Resort Scottsdale.

During 2023, we experienced a 132 basis point increase in occupancy and room rates were flat compared to 2022.

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

1 unchanged sentence

Rooms Revenue Occupancy

(change in bps) ADR (change in %)

(change in bps) ADR

(change in %)

Capital Hilton (1)

$ 6,738 775 9.5 %

Marriott Seattle Waterfront (2)

9 unchanged sentences

The Ritz-Carlton Sarasota (1)

(8,932) (1,149) (4.9) %

Hilton La Jolla Torrey Pines 855 151 1.1 %

1 unchanged sentence

The Ritz-Carlton Lake Tahoe (1)

(3,390) (623) (1.4) %

Cameo Beverly Hills

(1,745) (148) (11.2) %

Total $ (11,658) 233 (6.6) %

Non-comparable

C Beverly Hills Hotel $ 8,941 1,038 4.4 %

The Ritz-Carlton Reserve Dorado Beach $ 12,360 n/a n/a

1 unchanged sentence

Total $ 45,042

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

(1) This hotel was under renovation during 2023.

(2) This hotel was under renovation during 2022.

Food and Beverage Revenue .

Food and beverage revenue increased $26.1 million, or 16.4%, to $185.3 million during 2023 compared to 2022.

This increase is primarily driven by the recovery from the COVID-19 pandemic.

We experienced an aggregate increase in food and beverage revenue of $50.2 million at 13 comparable hotel properties as well as increases of $3.0 million, $14.2 million and $1.4 million at the Mr.

C Beverly Hills Hotel, The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale, respectively.

We experienced an aggregate increase in food and beverage revenue of $8.6 million at five comparable hotel properties and increases of $4.0 million and $22.4 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 $8.8 million at The Ritz-Carlton St.

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

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $22.2 million, or 39.1%, to $78.8 million during 2022 compared to 2021.

The increase is attributable to higher other hotel revenue of $11.9 million at 11 comparable hotel properties, and an increase of $917,000 at the Mr.

C Beverly Hills Hotel, $8.9 million at The Ritz-Carlton Reserve Dorado Beach, as well as $657,000 at the Four Seasons Resort Scottsdale, partially offset by a decrease of $257,000 at Marriott Seattle Waterfront and $21,000 at the Pier House Resort & Spa.

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $10.3 million, or 13.0%, to $89.1 million during 2023 compared to 2022.

This increase is attributable to higher other hotel revenue of $3.1 million at nine comparable hotel properties, $2.7 million at The Ritz-Carlton Reserve Dorado Beach and $7.4 million at the Four Seasons Resort Scottsdale.

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

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

Rooms Expense .

Rooms expense increased $11.0 million, or 11.7%, to $105.4 million in 2023 compared to 2022.

The increase is attributable to an aggregate increase in rooms expense of $22.9 million at 13 comparable hotel properties due to the hotel properties recovering from the COVID-19 pandemic and increases of $2.7 million at the Mr.

C Beverly Hills Hotel, $8.5 million at The Ritz-Carlton Reserve Dorado Beach as well as $538,000 at the Four Seasons Resort Scottsdale.

This increase is attributable to an aggregate increase in rooms expense of $4.3 million at six comparable hotel properties, an increase of $1.7 million at The Ritz-Carlton Reserve Dorado Beach and an increase of $7.3 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $2.3 million at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Pier House Resort & Spa, Bardessono Hotel and Spa, Hotel Yountville, Park Hyatt Beaver Creek Resort & Spa, and Cameo Beverly Hills.

Food and Beverage Expense .

Food and beverage expense increased $19.0 million, or 15.1%, to $144.5 million during 2023 compared to 2022.

The increase is attributable to an aggregate increase of $33.6 million at 13 comparable hotel properties and increases of $2.8 million at the Mr.

C Beverly Hills Hotel, $12.7 million at The Ritz-Carlton Reserve Dorado Beach and $1.3 million at the Four Seasons Resort Scottsdale.

This increase is attributable to higher food and beverage expense of $5.9 million at seven comparable hotel properties, $3.7 million at The Ritz-Carlton Reserve Dorado Beach and $14.9 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $5.5 million at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Sofitel Chicago Magnificent Mile, Park Hyatt Beaver Creek Resort & Spa and Cameo Beverly Hills.

Other Operating Expenses .

Other operating expenses increased $22.5 million, or 11.0%, to $227.9 million in 2023 compared to 2022.

Hotel operating expenses consist of direct expenses from departments associated with revenue streams and

indirect expenses associated with support departments and incentive management fees.

Other 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 $3.0 million in direct expenses and $19.5 million in indirect expenses and incentive management fees in 2023 compared to 2022.

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

The increase in direct expenses is associated with higher direct expenses of approximately $2.9 million at 11 comparable hotel properties as they are recovering from the COVID-19 pandemic, as well as an increase of $61,000 at the Mr.

C Beverly Hills Hotel, $5.0 million at The Ritz-Carlton Reserve Dorado Beach as well as $193,000 at the Four Seasons Resort Scottsdale, the increases are partially offset by lower direct expenses of $58,000 at the Capital Hilton and Marriott Seattle Waterfront.

The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $24.6 million comprising an increase of $15.6 million at our 13 comparable hotel properties and $9.1 million at the three acquired hotel properties;

(ii) marketing costs of $15.7 million comprising an increase of $11.5 million at our 13 comparable hotel properties and $4.2 million at the three acquired hotel properties;

(iii) repairs and maintenance of $6.2 million comprising an increase of $2.5 million at our 13 comparable hotel properties and $3.7 million at the three acquired hotel properties;

(iv) lease expense of $1.3 million comprising an increase of $1.1 million at our 13 comparable hotel properties and $250,000 at the three acquired hotel properties;

(v) energy costs of $6.7 million comprised of an increase of $3.3 million at our 13 comparable hotel properties and $3.4 million at the three acquired hotel properties;

and (vi) incentive management fees of $3.8 million comprising an increase of $2.9 million at our 13 comparable hotel properties and $888,000 at the three acquired hotel properties.

The increase in direct expenses is associated with higher direct expenses of approximately $1.1 million at nine comparable hotel properties, $1.3 million at The Ritz-Carlton Reserve Dorado Beach and $2.6 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by lower direct expenses of $2.0 million at the Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, Cameo Beverly Hills, 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 $6.6 million comprising of an increase of $7.0 million at the two acquired hotel properties, partially offset by a decrease of $413,000 at our 14 comparable hotel properties;

(ii) marketing costs of $8.9 million comprising an increase of $3.6 million at our 14 comparable hotel properties and $5.3 million at the two acquired hotel properties;

(iii) repairs and maintenance of $4.0 million comprising an increase of $544,000 at our 14 comparable hotel properties and $3.5 million at the two acquired hotel properties;

(iv) lease expense of $103,000 comprising an increase of $170,000 at our 14 comparable hotel properties, partially offset by an aggregate decrease of $67,000 at the two acquired hotel properties;

and (v) energy costs of $2.4 million comprised of an increase of $1.0 million 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 $2.5 million in incentive management fees, comprising of an aggregate decrease of $4.6 million at our 14 comparable hotel properties, offset by an aggregate increase of $2.1 million at the two acquired hotel properties.

Management Fees .

Base management fees increased $3.1 million, or 15.4%, to $23.3 million in 2023 compared to 2022.

Management fees increased approximately $4.9 million at 12 of our comparable hotel properties, $382,000 at the Mr.

C Beverly Hills Hotel, $1.9 million at The Ritz-Carlton Reserve Dorado Beach and $157,000 at the Four Seasons Resort Scottsdale.

These increases were partially offset by a decrease of $444,000 at the Sofitel Chicago Magnificent Mile primarily as a result of a legal settlement with Accor.

“Legal Proceedings.”

Management fees increased $2.1 million at six comparable hotel properties, $577,000 at The Ritz-Carlton Reserve Dorado Beach and $1.9 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of $1.5 million at the Park Hyatt Beaver Creek Resort & Spa, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa, Cameo Beverly Hills, 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 $4.2 million, or 12.1%, to $30.8 million in 2022 compared to 2021.

The decrease primarily resulted from an aggregate decrease of $8.5 million at five hotel properties, including a $5.5 million and $2.5 million decrease at the Sofitel Chicago Magnificent Mile and Marriott Seattle Waterfront, respectively, due to lower property tax assessments.

The decrease is partially offset by increases of $768,000 at the Mr.

C Beverly Hills Hotel, $2.1 million at The Ritz-Carlton Reserve Dorado Beach and $78,000 at the Four Seasons Resort Scottsdale as a result of their acquisitions, as well as an aggregate increase of approximately $1.3 million at eight hotel properties.

Property taxes, insurance and other increased $7.9 million, or 25.6%, to $38.6 million in 2023 compared to 2022.

This increase is primarily attributable to an aggregate increase of $5.9 million at 12 comparable hotel properties, $1.2 million at The Ritz-Carlton Reserve Dorado Beach and $875,000 at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $87,000 at the Sofitel Chicago Magnificent Mile and $64,000 at The Notary Hotel.

Depreciation and Amortization .

Depreciation and amortization increased $15.2 million, or 19.4%, to $93.3 million for 2023 compared to 2022.

The increase comprised $1.5 million at the Mr.

C Beverly Hills Hotel, $5.1 million at The Ritz-Carlton Reserve Dorado Beach and $781,000 at the Four Seasons Resort Scottsdale as a result of their acquisitions as well as an aggregate increase of $2.2 million at the Park Hyatt Beaver Creek Resort & Spa, Marriott Seattle Waterfront, The Ritz-Carlton St.

Thomas and The Ritz-Carlton Lake Tahoe.

These increases were partially offset by an aggregate decrease of $5.2 million at nine comparable hotel properties primarily due to fully depreciated assets.

This increase is comprised of $1.5 million at The Ritz-Carlton Reserve Dorado Beach, $8.8 million at the Four Seasons Resort Scottsdale and an aggregate increase of $8.5 million at eight comparable hotel properties.

These increases were partially offset by an aggregate decrease of $3.7 million at the Sofitel Chicago Magnificent Mile, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa and Cameo Beverly Hills, primarily due to fully depreciated assets.

Advisory Services Fee.

Advisory services fee increased $6.2 million, or 27.4%, to $28.8 million in 2022 compared to 2021 due to increases in the base advisory fee of $2.0 million, reimbursable expenses of $2.4 million, equity-based compensation of $1.1 million, and incentive fee of $803,000.

Advisory services fee increased $2.2 million, or 7.8%, to $31.1 million in 2023 compared to 2022 due to increases in reimbursable expenses of $3.7 million and base advisory fee of $1.2 million.

These increases were partially offset by decreases in equity-based compensation of $1.8 million and incentive fee of $803,000.

In 2023, we recorded an advisory services fee of $31.1 million, which included a base advisory fee of $14.0 million, reimbursable expenses of $8.4 million and $8.8 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

In 2022, we recorded an advisory services fee of $28.8 million, which included a base advisory fee of $12.8 million, reimbursable expenses of $4.7 million, $10.6 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 $803,000.

In 2021, we recorded an advisory services fee of $22.6 million, which included a base advisory fee of $10.8 million, reimbursable expenses of $2.3 million and $9.5 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

(Gain) loss on legal settlements .

In 2021, we recognized a gain of $728,000 related to the settlement of a transfer tax matter with the City of San Francisco and $189,000 related to a billing dispute.

Gain on Legal Settlements.

During 2022, 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.

Transaction costs .

In 2021, we recognized $563,000 of transaction costs associated with the acquisition of the Mr.

C Beverly Hills Hotel that closed on August 5, 2021.

There were no transaction costs in 2022.

There was no such gain during 2023.

Corporate General and Administrative .

Corporate general and administrative expense was $18.1 million in 2022 and $8.7 million in 2021.

The increase in corporate general and administrative expenses is primarily due to higher professional fees of $1.2 million, higher public company costs of $108,000, higher reimbursed operating expenses of Ashford Securities of $7.5 million and higher miscellaneous expenses of $572,000.

Corporate general and administrative expense was $13.5 million in 2023 compared to $18.1 million in 2022.

The decrease in corporate general and administrative expenses is primarily due to lower

reimbursed operating expenses of Ashford Securities of $5.1 million, lower miscellaneous expenses of $307,000 and lower public company costs of $271,000, partially offset by higher professional fees of $1.1 million.

During 2022, the funding estimate to Ashford Securities was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities that resulted in additional expense of approximately $7.2 million.

Gain (loss) on Insurance Settlement and Disposition of Assets .

In 2021, we recognized a gain of $481,000 associated with proceeds received from an insurance claim, a gain of $18,000 upon disposition of certain fixed assets, as well as a gain of $197,000 associated with the sale of certain ERFP assets to Ashford Inc.

There was no such gain (loss) in 2022.

Equity in Earnings (Loss) of Unconsolidated Entity .

1 unchanged sentence

Interest Income .

Interest income was $2.7 million and $48,000 in 2022 and 2021, respectively.

The increase in interest income was primarily related to higher cash balances and higher interest rates in 2022 compared to 2021.

Interest income was $6.4 million and $2.7 million in 2023 and 2022, respectively.

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

Other Income (Expense).

In 2023, we recorded miscellaneous income of $293,000.

Interest Expense and Amortization of Discounts and Loan Costs .

Interest expense and amortization of discounts and loan costs increased $42.1 million, or 80.6%, to $94.2 million for 2023 compared to 2022.

The increase is primarily due to higher interest expense from a higher average LIBOR rate, as well as higher interest expense from our Convertible Senior Notes and the mortgage loans associated with the Mr.

C Beverly Hills Hotel and The Ritz-Carlton Reserve Dorado Beach acquisitions.

The average LIBOR rates for 2022 and 2021 were 1.91% and 0.10%, respectively.

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 in December 2022.

The average SOFR rates for 2023 and 2022 were 4.91% and 1.58%, respectively.

LIBOR ceased to be published after June 30, 2023.

The average LIBOR rate for 2022 was 1.91%.

Write-off of Loan Costs and Exit Fees.

Write-off of loan costs and exit fees was $146,000 in 2022 primarily resulting from the refinance of the Park Hyatt Beaver Creek Resort & Spa in February 2022, the assumption of the mortgage loan from the acquisition of The Ritz-Carlton Reserve Dorado Beach, the extension of The Ritz-Carlton St.

Thomas mortgage loan and the amendments associated with Bardessono Hotel and Spa and The Ritz-Carlton Lake Tahoe mortgage loans.

Write-off of loan costs and exit fees was $2.0 million in 2021.

This included a $1.2 million write-off of unamortized loan costs upon the payoff of our secured term loan payoff and $387,000 of third-party fees from amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments.

These third-party fees incurred in conjunction with these amendments were expensed in accordance with applicable accounting guidance.

In addition, there was a write-off of loan costs of approximately $419,000 upon the $20 million pay-down of the mortgage loan assumed with the acquisition of the Mr.

C Beverly Hills Hotel.

Write-off of loan costs and exit fees was $3.5 million in 2023 related to various loan modifications and costs associated with the $200 million secured credit facility.

Write-off of loan costs and exit fees was $146,000 in 2022 related to various loan refinances and modifications.

Gain (loss) on Extinguishment of Debt.

Gain on extinguishment of debt was $2.3 million in 2023 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 2022.

Realized and Unrealized Gain (Loss) on Derivatives .

Realized and Unrealized gain on derivatives of $5.0 million for 2022 consisted of unrealized gains of approximately $3.8 million on interest rate caps and approximately $1.2 million on warrants and realized gains of $497,000 associated with payments received from counterparties on interest rate caps.

Realized and unrealized gain on derivatives of $32,000 for 2021 consisted of an unrealized gain of approximately $94,000 on warrants, partially offset by an unrealized loss of approximately $62,000 on interest rate caps.

Realized and unrealized loss on derivatives of $663,000 for 2023 consisted of unrealized loss on interest rate caps of approximately $8.7 million, partially offset by an unrealized gain on warrants of $272,000 and a realized gain of $7.8 million associated with payments received from counterparties on in-the-money interest rate caps.

Realized and Unrealized gain on derivatives of $5.0 million for 2022 consisted of an unrealized gain of approximately $3.3 million on interest rate caps, an unrealized gain of approximately $1.2 million on warrants and a realized gain of $497,000 associated with payments received from counterparties on in-the-money interest rate caps.

Income Tax (Expense) Benefit .

Income tax expense increased $2.7 million, from $1.3 million in 2021 to $4.0 million in 2022.

This increase was primarily due to an increase in the profitability of our TRS entities in 2022 compared to 2021.

Income tax expense decreased $1.4 million, from $4.0 million in 2022 to $2.7 million in 2023.

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

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

Our noncontrolling interest partner in consolidated entities was allocated income of $2.1 million and a loss of $2.7 million in 2022 and 2021, respectively.

Our noncontrolling interest partner in consolidated entities was allocated income of $1.6 million and $2.1 million in 2023 and 2022, respectively.

At both December 31, 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 $476,000 in 2022 and $3.6 million in 2021.

Noncontrolling interests in operating partnership were allocated a net loss of $5.2 million in 2023 and net loss of $476,000 in 2022.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 6.63% and 7.69% as of December 31, 2023 and 2022, respectively.

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Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including:

• advisory fees payable to Ashford LLC;

• recurring maintenance necessary to maintain our hotel properties in accordance with brand standards;

• interest expense and scheduled principal payments on outstanding indebtedness;

• distributions, if any, in the form of dividends on our common stock, necessary to qualify for taxation as a REIT;

• dividends on our common stock;

• dividends on our preferred stock;

• capital expenditures to improve our hotel properties.

• advisory fees payable to Ashford LLC.

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, asset sales 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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The success of our business strategy will depend, in part, on our ability to access these various capital sources.

While management cannot provide any assurances, management believes that our cash flow from operations and our existing cash balances will be adequate to meet upcoming anticipated requirements for interest and principal payments on debt (excluding any potential final maturity principal payments), working capital, and capital expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S.

While management cannot provide any assurances, management believes that our cash flow from operations and our existing cash balances will be adequate to meet upcoming anticipated requirements for interest and principal payments on debt (excluding any potential final maturity principal payments and paydowns for extension tests), working capital, and capital expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S.

federal income tax purposes.

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If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects could be materially and adversely affected.

Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties decline.

Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties declines.

When these provisions are triggered, substantially all of the profit generated by the hotel properties securing such loan is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders.

This could affect our liquidity and our ability to make distributions to our stockholders until such time that a cash trap is no longer in effect for such loan.

These cash trap provisions have been triggered on some of our mortgage loans, as discussed above.

Our loans may remain subject to 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 December 31, 2022, our $435 million mortgage loan was in a cash trap and approximately $298,000 of our restricted cash was subject to this cash trap.

These cash trap provisions have been triggered on one mortgage loan, as discussed below.

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 December 31, 2023, The Ritz-Carlton Lake Tahoe was in a cash trap, although there was no cash trapped for this mortgage loan.

As of December 31, 2023, the Company held cash and cash equivalents of $85.6 million and restricted cash of $80.9 million, the vast majority of which is comprised of lender and manager-held reserves.

As of December 31, 2023, $17.7 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 December 31, 2023, our net debt to gross assets was 39.7%.

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

Treasury securities with maturity dates of less than 90 days and corporate cash held at commercial banks in Insured Cash Sweep (“ICS”) accounts, which are fully insured by the FDIC.

The Company’s cash and cash equivalents also includes property-level operating cash deposited with commercial banks that have been designated as a Global Systemically Important Bank (“G-SIB”) by the Financial Stability Board (“FSB”) and a small amount deposited with other commercial banks.

Our estimated future obligations as of December 31, 2023 include both current and long-term obligations.

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As of December 31, 2023, we held extension options to extend the principal for all of the debt due in the next twelve months except for $219.1 million.

Subsequent to December 31, 2023, we extended two mortgage loans.

See discussions below in “Debt Transactions.”

As discussed in note 17 to our consolidated financial statements, under our operating leases we have current obligations of approximately $3.4 million and long-term obligations of approximately $155.4 million.

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The board of director’s authorization replaced any previous repurchase authorizations.

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

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

Subsequent to December 31, 2022, the Company repurchased approximately 3.9 million shares of its common stock for approximately $18.9 million.

The Company repurchased approximately 5.4 million shares of its common stock for approximately $25.0 million and has completed the $25.0 million repurchase authorization.

As of December 31, 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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5 to the Third Amended and Restated Agreement of Limited Partnership to amend the terms of its operating partnership agreement to conform to the terms of the Series E Articles Supplementary and Series M Articles Supplementary.

As of March 8, 2023, the Company has issued approximately 16.4 million shares of Series E Preferred Stock and received net proceeds of approximately $369.5 million and issued approximately 2.0 million shares of Series M Preferred Stock and received net proceeds of approximately $47.6 million.

The Company also issued approximately 68,000 shares of Series E Preferred Stock and approximately 4,000 shares of Series M Preferred Stock, respectively, pursuant to the dividend reinvestment plan.

The Company issued approximately 16.4 million shares of Series E Preferred Stock and received net proceeds of approximately $369.5 million and issued approximately 2.0 million shares of Series M Preferred Stock and received net proceeds of approximately $47.6 million.

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

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

(“YA”), pursuant to which the Company will be able to sell up to 7,780,786 shares of its common stock (the “Commitment Amount”) at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating on the earliest of (i) the first day of the month next following the 36-month anniversary of the SEDA or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”).

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

“Market Price” means the lowest daily VWAP of the Company’s common stock during the five consecutive trading days commencing on the trading day following the date the Company submits an advance notice to YA.

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

during regular trading hours.

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

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

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

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

There are no other restrictions on future financing transactions.

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

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

As of March 8, 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.

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 March 8, 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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Debt Transactions

On February 2, 2022, the Company refinanced its mortgage loan secured by the Park Hyatt Beaver Creek Resort & Spa, which had a final maturity date in April 2022.

The new, non-recourse mortgage loan totals $70.5 million and has a two-year initial term with three one-year extension options, subject to the satisfaction of certain conditions.

The mortgage loan is interest only and provides for a floating interest rate of SOFR + 2.86%.

On March 11, 2022, in connection with the acquisition of The Ritz-Carlton Reserve Dorado Beach the Company assumed a $54.0 million mortgage loan.

See note 6 to our consolidated financial statements.

On October 27, 2022, the Company amended its $40.0 million mortgage loan secured by the Bardessono Hotel and Spa.

Terms of the agreement replaced the variable interest rate of LIBOR + 2.55% with SOFR + 2.65%.

On October 27, 2022, the Company amended its $54.0 million mortgage loan secured by the Ritz-Carlton Lake Tahoe.

Terms of the agreement replaced the variable interest rate of LIBOR + 2.10% with SOFR + 2.20%.

On September 29, 2022, the Company amended its $80.0 million mortgage loan secured by the Pier House Resort & Spa.

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

On December 23, 2022, we entered into a $100 million mortgage loan, secured by the Four Seasons Resort Scottsdale at Troon North.

The mortgage loan has a three-year initial term and two one-year extension options, subject to satisfaction of certain conditions.

The mortgage loan is interest only and bears interest at a rate of SOFR + 3.75% with a SOFR floor of 1.00%.

On January 18, 2023, the Company repaid its $54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach.

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 year ended December 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 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 12 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, as amended by the First Amendment to Credit Agreement, dated as of February 21, 2024, evidences a $200 million secured credit facility (the “Facility”) comprised of a secured term loan facility of $150 million (the “Term Loan Facility”) and a 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 an amount 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 1.55 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 September 29, 2023, the Company amended its mortgage loan secured by the Four Seasons Resort Scottsdale.

Terms of the amendment included increasing the outstanding principal from $100 million to $140 million, and extending the final maturity date by one year to December 2028.

On October 31, 2023, the Company amended its mortgage loan secured by The Ritz-Carlton Lake Tahoe.

On December 22, 2023, the Company entered into a $110.6 million mortgage loan with Aareal Capital Corporation that is secured by the Capital Hilton in Washington, D.C.

On January 3, 2024, the Company extended the mortgage loan secured by the Pier House Resort & Spa in Key West, Florida.

On January 29, 2024, the Company extended the mortgage loan secured by The Ritz-Carlton St.

Thomas in St.

Thomas, USVI.

On February 5, 2024, the Company amended the mortgage loan secured by the Hilton La Jolla Torrey Pines.

It remains encumbered by the original mortgage loan, which now has been partially paid down to a remaining balance of $66.6 million.

While the Company considers its alternatives regarding refinancing the loan or potentially selling the asset, the lender has provided a six month forbearance agreement.

During this time, the mortgage loan bears an annual fixed interest rate of 9.0%.

On March 7, 2024, the Company closed on a $62.0 million non-recourse loan secured by the Ritz-Carlton Reserve Dorado Beach.

The mortgage loan has a two-year term, is interest only and provides for a floating interest rate of SOFR + 4.75%.

Sources and Uses of Cash

We had approximately $85.6 million and $261.5 million of cash and cash equivalents at December 31, 2023 and December 31, 2022, respectively.

We anticipate using funds to pay for capital expenditures for our 16 hotel properties, estimated to be approximately $80.0 million in fiscal year 2023 and debt interest payments, estimated to be approximately $80.8 million in 2023 based on future payments using the one month LIBOR/SOFR rate as of December 31, 2022.

This estimate will fluctuate based on changes in the one-month LIBOR/SOFR rate and any future changes in outstanding indebtedness.

We anticipate using funds to pay for capital expenditures for our 16 hotel properties, estimated to be approximately $90 to $100 million in fiscal year 2024 and debt interest payments, estimated to be approximately $89.6 million in 2024 based on future payments using the one month SOFR rate as of December 31, 2023.

This estimate will fluctuate based on changes in the one-month SOFR rate and any future changes in outstanding indebtedness.

Net Cash Flows Provided by (Used in) Operating Activities.

Net cash flows provided by operating activities were $109.5 million and $64.0 million for the twelve months ended December 31, 2022 and 2021, respectively.

Cash flows from operations were impacted by changes in hotel operations of our 13 comparable hotel properties as well as the acquisitions of the Mr.

C Beverly Hills Hotel on August 5, 2021, The Ritz-Carlton Reserve Dorado Beach on March 11, 2022 and the Four Seasons Resort Scottsdale on December 1, 2022.

Net cash flows provided by operating activities were $84.7 million and $109.5 million for the years ended December 31, 2023 and 2022, respectively.

Cash flows from operations were impacted by changes in hotel operations of our 14 comparable hotel properties, The Ritz-Carlton Reserve Dorado Beach, acquired on March 11, 2022, and the Four Seasons Resort Scottsdale, acquired on December 1, 2022.

Cash flows from operations are also impacted by the timing of working capital cash flows, such as collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties and settling with hotel managers.

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For the year ended December 31, 2023, net cash flows used in investing activities were $77.1 million.

These cash outflows were primarily attributable to $49.1 million of capital improvements made to various hotel properties, approximately $354.4 million associated with the acquisition of The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale and additional investments in OpenKey of $328,000, partially offset by cash inflows of $1.7 million associated with an amendment to a hotel management agreement.

These cash outflows were primarily attributable to $77.1 million of capital improvements made to various hotel properties and a $238,000 loan to OpenKey partially offset by cash inflows of $361,000 related to proceeds from property insurance.

Our capital improvements consisted of approximately $54.6 million of return on investment capital projects and approximately $22.6 million of renewal and replacement capital projects.

Return on investment capital projects are designed to improve the positioning of our hotel properties within their markets and competitive sets.

Renewal and replacement capital projects are designed to maintain the quality and competitiveness of our hotels.

For the year ended December 31, 2022, net cash flows used in investing activities were $402.2 million.

These cash outflows were primarily attributable to $25.6 million of capital improvements made to various hotel properties, approximately $17.6 million associated with the acquisition of the Mr.

C Beverly Hills Hotel and earnest money associated with the acquisition of The Ritz-Carlton Reserve Dorado Beach, partially offset by proceeds of $1.8 million from the sale of certain ERFP assets to Ashford Inc.

These cash outflows were primarily attributable to $49.1 million of capital improvements made to various hotel properties, approximately $354.4 million associated with the acquisitions of The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale and additional investments in OpenKey of $328,000, partially offset by cash inflows of $1.7 million associated with an amendment to a hotel management agreement.

Our capital improvements consisted of approximately $28.0 million of return on investment capital projects and approximately $21.2 million of renewal and replacement capital projects.

Net Cash Flows Provided by Financing Activities.

Return on investment capital projects are designed to improve the positioning of our hotel properties within their markets and competitive sets.

Renewal and replacement capital projects are designed to maintain the quality and competitiveness of our hotels.

Net Cash Flows Provided by (Used in) Financing Activities.

For the year ended December 31, 2023, net cash flows used in financing activities were $156.8 million.

Cash outflows primarily consisted of repayments of indebtedness of $534.3 million, $52.6 million of dividend and distribution payments, $19.3 million of payments to repurchase common stock, payments of $7.2 million for the redemption of operating partnership units, $5.1 million to purchase interest rate caps, $2.7 million of distributions to a noncontrolling interest in consolidated entities, $11.6 million payments of loan costs and exit fees, and $9.8 million for cash redemptions of Series E and Series M preferred stock.

These cash outflows were partially offset by cash inflows of $370.6 million from borrowings on indebtedness, $97.9 million from the issuance of preferred stock, $9.5 million of contributions from a noncontrolling interest in consolidated entities and $7.7 million of proceeds from in-the-money interest rate caps.

For the year ended December 31, 2022, net cash flows provided by financing activities were $345.1 million.

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The cash inflows were partially offset by repayments of indebtedness of $68.5 million, $20.8 million of dividend and distribution payments, $7.4 million related to payments for stock repurchases, $4.1 million of payments for loan costs and fees, $3.0 million of payments for derivatives, and $499,000 for cash redemptions of Series E and Series M preferred stock.

For the year ended December 31, 2021, net cash flows provided by financing activities were $128.0 million.

Cash inflows primarily consisted of net proceeds of $83.2 million from the issuance of our Convertible Senior Notes, $102.5 million from the issuance of common stock, $36.9 million from the issuance of preferred stock and contributions of $1.2 million from a noncontrolling interest in consolidated entities.

The cash inflows were partially offset by repayments of indebtedness of $84.2 million, $9.1 million of dividend and distribution payments and $1.9 million of payments for loan costs and fees.

We rely entirely on the performance of our properties and the ability of the properties’ managers to increase revenues to keep pace with inflation.

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Asset write-downs resulting from property damage are recorded up to the amount of the allocable property insurance deductible in the period that the property damage occurs.

There was no impairment charge recorded for the years ended December 31, 2022, 2021 and 2020.

There were no impairment charges recorded for the years ended December 31, 2023, 2022 and 2021.

Income Taxes.

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At each reporting date, we evaluate whether it is more likely than not that we will utilize all or a portion of our deferred tax assets.

We consider all available positive and negative evidence, including historical results of operations, projected future taxable income, carryback potential and scheduled

reversals of deferred tax liabilities.

We consider all available positive and negative evidence, including historical results of operations, projected future taxable income, carryback potential and scheduled reversals of deferred tax liabilities.

In evaluating the objective evidence that historical results provide, we consider three years of consolidated cumulative operating income (loss).

At December 31, 2023, we had TRS net operating loss carry forwards for U.S.

federal income tax purposes of $68.5 million, of which $50.7 million is subject to expiration and will begin to expire in 2023.

federal income tax purposes of $63.6 million, of which $47.3 million is subject to expiration and began expiring in 2024.

The remainder was generated after December 31, 2017 and is not subject to expiration under the Tax Cuts and Jobs Act.

The loss carry forwards subject to expiration may be available to offset future taxable income, if any, for 2023 through 2034, with the remainder available to offset taxable income beyond 2034;

The loss carry forwards subject to expiration may be available to offset future taxable income, if any, for 2024 through 2034, with

the remainder available to offset taxable income beyond 2034;

however, there could be substantial limitations on their use imposed by the Code.

Management determined that it is more likely than not that $16.2 million of our net deferred tax assets will not be realized and a valuation allowance has been recorded accordingly.

At December 31, 2023, Braemar Hotels & Resorts Inc., our REIT, had net operating loss carryforwards for U.S.

federal income tax purposes of $109.7 million based on the latest filed tax return.

Of this amount, $2.2 million is subject to expiration in in 2033.

Of this amount, $2.2 million is subject to expiration in 2033.

The remainder is not subject to expiration under the Tax Cuts and Jobs Act.

Management determined that it is more likely than not that $18.6 million of our net deferred tax assets will not be realized and a valuation allowance has been recorded accordingly.

The “Income Taxes” Topic of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.

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Recently Adopted Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

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

This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt:

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

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

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

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

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

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

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

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

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

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

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

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

The impact of adoption on our consolidated statement of operations for the year ended December 31, 2022 resulted in a decrease to net interest expense by approximately $1.1 million relating to the non-cash interest expense associated with amortization of the debt discount.

The impact on basic and diluted net loss per share of common stock attributable to common stockholders for the year ended December 31, 2022 was $(0.02).

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

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

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

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

The amendments in ASU Nos.

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

The Company applied the optional expedient in evaluating debt modifications converting from LIBOR to SOFR.

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

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

The Company adopted the standards upon the respective effective dates.

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

Recently Issued Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the impact that ASU 2023-07 will have on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which eliminated the historic requirement that entities disclose information concerning unrecognized tax benefits having a reasonable possibility of significantly increasing or decreasing in the 12 months following the reporting date.

For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024.

For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025.

Early adoption is permitted.

We are currently evaluating the impact that ASU 2023-09 will have on our consolidated financial statements and related disclosures.

Non-GAAP Financial Measures

1 unchanged sentence

EBITDA is defined as net income (loss) before interest expense and amortization of loan costs, depreciation and amortization, income taxes, equity in (earnings) loss of unconsolidated entity and after the Company’s portion of EBITDA of OpenKey.

In addition, we excluded impairment on real estate, (gain) loss on insurance settlement and disposition of assets and Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by NAREIT.

We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable) contract assets (liabilities), transaction and conversion costs, write-off of loan costs and exit fees, gain/loss on insurance settlements, legal, advisory and settlement costs, advisory services incentive fee, other/income expense, stock/unit-based compensation and the Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/ loss on derivatives.

We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business.

We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

In addition, we exclude impairment on real estate, (gain) loss on insurance settlement and disposition of assets and Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by NAREIT.

loss on insurance settlements, advisory and settlement costs, advisory services incentive fee, gain/loss on extinguishment of debt, stock/unit-based compensation and the Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/ loss on derivatives.

We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because they provide investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business.

We also believe they help investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

10 unchanged sentences

Company’s portion of EBITDA of OpenKey (274) (334) (250)

EBITDA 153,673 73,078 (10,605)

159,531 153,673 73,078

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

2 unchanged sentences

Transaction and conversion costs 4,561 9,679 2,637

Other (income) expense (497) — 5,126

Write-off of loan costs and exit fees 146 1,963 3,920

(Gain) loss on insurance settlements (55) — —

Unrealized (gain) loss on derivatives (4,464) (32) (4,959)

Write-off of premiums, loan costs and exit fees 3,489 146 1,963

Realized and unrealized (gain) loss on derivatives 663 (4,961) (32)

Stock/unit-based compensation 9,244 11,285 10,204

Legal, advisory and settlement costs 1,397 2,170 (208)

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

Other (income) expense

(Gain) loss on insurance settlements

Company’s portion of adjustments to EBITDAre of OpenKey — 8 7

Adjusted EBITDAre $ 176,748 $ 172,408 $ 87,465

The following table reconciles net income (loss) to EBITDA attributable to the Company and OP unitholders on a property-by-property basis for each of our hotel properties owned and on a corporate basis during the year ended December 31, 2022.

The results of The Ritz-Carlton Reserve Dorado Beach and Four Seasons Resort Scottsdale are included from its acquisition date through December 31, 2022 (in thousands) (unaudited):

Year Ended December 31, 2023

Capital Hilton Hilton La Jolla Torrey Pines Sofitel Chicago Magnificent Mile Bardessono Hotel and Spa Pier House Resort & Spa Hotel Yountville Park Hyatt Beaver Creek Resort & Spa The Notary Hotel The Clancy The Ritz-Carlton Sarasota The Ritz-Carlton Lake Tahoe Marriott Seattle Waterfront The Ritz-Carlton St.

Beverly Hills Hotel The Ritz-Carlton Dorado Beach Four seasons Resort Scottsdale Hotel Total Corporate / Allocated (1)

Thomas Cameo Beverly Hills The Ritz-Carlton Dorado Beach Four Seasons Resort Scottsdale

Hotel Total Corporate / Allocated (1)

Braemar Hotels & Resorts Inc.

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The results of The Mr.

C Beverly Hills Hotel are included from its acquisition date through December 31, 2021 (in thousands) (unaudited):

The results of The Ritz-Carlton Reserve Dorado Beach and Four Seasons Resort Scottsdale are included from its acquisition date through December 31, 2022 (in thousands) (unaudited):

Year Ended December 31, 2022

C Beverly Hills Hotel Hotel Total Corporate / Allocated (1)

Thomas Cameo Beverly Hills

The Ritz-Carlton Dorado Beach Four Seasons Resort Scottsdale

Hotel Total Corporate / Allocated (1)

Braemar Hotels & Resorts Inc.

16 unchanged sentences

(2) Includes allocated amounts which were not specific to hotel properties, such as gain on sale of hotel property, corporate taxes, insurance and legal expenses.

The results of the Cameo Beverly Hills are included from its acquisition date through December 31, 2021 (in thousands) (unaudited):

Year Ended December 31, 2021

Thomas Hotel Total Corporate / Allocated (1)

C Beverly Hills Hotel Hotel Total Corporate / Allocated (1)

Braemar Hotels & Resorts Inc.

18 unchanged sentences

NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP.

Our calculation of Adjusted FFO excludes gain/loss on extinguishment of preferred stock, transaction and conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, other income/expense, stock/unit-based compensation, gain/loss on insurance settlements and non-cash items such as deemed dividends on redeemable preferred stock, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives and the Company’s portion of adjustments to FFO of OpenKey.

Our calculation of Adjusted FFO excludes transaction and conversion costs, other income/expense, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, stock/unit-based compensation, gain/loss on insurance settlements, gain/loss on extinguishment of debt, and non-cash items such as deemed dividends on redeemable preferred stock, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives and the Company’s portion of adjustments to FFO of OpenKey.

FFO and Adjusted FFO exclude amounts attributable to the portion of a partnership owned by the third-party.

16 unchanged sentences

Deemed dividends on preferred stock

(4,719) (6,954) —

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

8 unchanged sentences

Deemed dividends on preferred stock

4,719 6,954 —

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

Transaction and conversion costs 4,561 9,679 2,637

Other (income) expense — — 5,126

Interest expense accretion on refundable membership club benefits 723 772 818

Write-off of loan costs and exit fees 146 1,963 3,920

Amortization of loan costs (1)

2,365 2,121 3,332

(Gain) loss on insurance settlements (55) — —

Write-off of premiums, loan costs and exit fees 3,489 146 1,963

Unrealized (gain) loss on derivatives 8,413 (4,464) (32)

1 unchanged sentence

Legal, advisory and settlement costs 1,397 2,170 (208)

Interest expense accretion on refundable membership club deposits 671 723 772

Amortization of loan costs 3,289 2,365 2,121

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

Other (income) expense

(Gain) loss on insurance settlements

Company’s portion of adjustments to FFO of OpenKey — 8 7

8 unchanged sentences

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 7. Management’s Discussion and Analysis