What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-14 compared with 2023-03-10 · 523 added, 537 removed, 1332 unchanged (44% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP ;

Report of Independent Registered Public Accounting Firm ( BDO USA, P.C.

Dallas, Texas ;

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In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 10, 2023 expressed an adverse opinion thereon.

Change in Accounting Principle

As discussed in Notes 2 and 6 to the consolidated financial statements, the Company changed its method of accounting for convertible debt as of January 1, 2022, due to the adoption of Accounting Standards Update 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 using the modified retrospective method .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 14, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Hotel Property Acquisitions

As described in Note 4 to the consolidated financial statements, during the year ended December 31, 2022, the Company acquired a 100% interest in the Ritz-Carlton Reserve Dorado Beach Hotel for $140.9 million, as well as a 100% interest in the

Four Seasons Resort Scottsdale at Troon North for $267.8 million (collectively, the “Acquisitions”).

Management utilized various estimates in the determination of the relative fair values for these Acquisitions.

We identified the evaluation of the relative fair values allocated to the investment in hotel properties assets acquired in the Acquisitions as a critical audit matter.

Specifically, there was judgment applied by management in determining the relative fair values of the acquired land, hotel buildings and respective improvements, as well as the furniture, fixtures, and equipment.

The valuation included making judgments about the methodologies and inputs to the valuation models.

Auditing these matters involved especially challenging auditor effort due to the specialized skills and knowledge required to evaluate the valuation methodologies and the reasonableness of the inputs used to determine the relative fair values of the acquired tangible assets.

The primary procedures we performed to address this critical audit matter utilized valuation professionals with specialized knowledge and skills, who assisted in:

• Assessing the appropriateness of the valuation methodologies utilized to determine the relative fair values;

• Evaluating the reasonableness of the assumptions utilized in developing the estimates for determining the relative fair values of the acquired land, hotel buildings and respective improvements, as well as the furniture, fixtures, and equipment;

• Verifying the mathematical accuracy of the valuation models used by the Company to determine the relative fair values of the acquired tangible assets in the Acquisitions.

/s/ BDO USA, LLP

Impairment of Investments in Hotel Properties

At December 31, 2023, the Company’s consolidated investments in hotel properties, net, totaled $1.9 billion.

As described in Notes 2 and 4 to the consolidated financial statements, the hotel properties are evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Recoverability of a hotel property is measured by comparing the carrying amount of the hotel to its estimated future undiscounted cash flows.

If the carrying amount of the hotel is not recoverable, an impairment charge is recognized for the amount by which the hotel’s carrying amount exceeds its estimated fair value.

During 2023, the Company did not record any impairment charges.

We identified impairment of investments in hotel properties as a critical audit matter.

For investments in hotel properties where events or changes in circumstances indicated that the carrying amounts may not be recoverable, it is necessary for management to estimate the future undiscounted cash flows expected from the use and eventual disposition of the hotels.

Auditing the cash flows expected from the eventual disposition of the hotel properties included the involvement of professionals with specialized knowledge and skills.

The primary procedures we performed to address the critical audit matter utilized valuation professionals with specialized knowledge and skills, who assisted in:

• Evaluating the cash flows expected from the eventual disposition of the hotel properties.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2015.

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Prepaid expenses 9,938 7,044

Deferred costs, net 75 —

Investment in unconsolidated entity 1,674 1,689

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Due to Ashford Inc.

Due to related parties, net 603 —

Due to third-party hotel managers 1,608 2,096

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Commitments and contingencies (note 16)

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,078,017 shares issued and outstanding at December 31, 2022 and December 31, 2021

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

65,426 65,426

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Series M redeemable preferred stock, $ 0.01 par value, 1,832,805 and 1,428,332 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

45,623 35,182

Redeemable noncontrolling interests in operating partnership 32,395 40,555

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Corporate general and administrative 13,523 18,084 8,717

Total expenses 601,192 426,789 316,974

Total operating expenses 677,670 601,192 426,789

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

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

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

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

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Equity-based compensation — — — — 6,891 — — 6,891 — — — — — — 3,292

Issuance of common stock — — 18,243 183 102,134 — — 102,317 — — — — — — —

Issuance of preferred stock — — — — — — — — — — 1,710 36,211 29 582 —

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

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

Forfeiture of restricted common shares — — ( 26 ) — — — — — — — — — — — —

Issuance of preferred shares — — — — — — — — 23 29 — — — — —

Issuance of common stock — — 4,729 47 13,280 — — 13,327 — — — — — — —

PSU dividend claw back upon cancellation — — — — — 143 — 143 — — — — — — —

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— — — — — ( 3,300 ) — ( 3,300 ) — — — — — — —

Distributions to noncontrolling interests — — — — — — ( 2,639 ) ( 2,639 ) — — — — — — —

Dividends declared – preferred stock - Series E ($ 1.00 /share)

— — — — — ( 683 ) — ( 683 ) — — — — — — —

Dividends declared – preferred stock - Series M ($ 0.85 /share)

— — — — — ( 15 ) — ( 15 ) — — — — — — —

Contributions from noncontrolling interests — — — — — — 1,189 1,189 — — — — — — —

Performance LTIP dividend claw back upon cancellation — — — — — — — — — — — — — — 38

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Net income (loss) — — — — — ( 26,664 ) ( 2,650 ) ( 29,314 ) — — — — — — ( 3,597 )

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

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

Redemption value adjustment - preferred stock — — — — — ( 3,261 ) — ( 3,261 ) — — — 3,128 — 133 —

Redemption value adjustment — — — — — ( 108 ) — ( 108 ) — — — — — — 108

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Purchase of common stock — — ( 1,773 ) ( 17 ) ( 7,448 ) — — ( 7,465 ) — — — — — — —

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

Equity-based compensation — — — — 5,475 — — 5,475 — — — — — — 5,810

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

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

Forfeiture of restricted common shares — — ( 22 ) — — — — — — — — — — — —

PSU dividend claw back upon cancellation — — — — — 7 — 7 — — — — — — —

Dividends declared - common stock - ($ 0.08 /share)

— — — — — ( 5,672 ) — ( 5,672 ) — — — — — — —

Dividends declared – preferred stock - Series B ($ 1.38 /share)

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

Distributions to noncontrolling interests — — — — — — ( 2,024 ) ( 2,024 ) — — — — — — ( 665 )

Performance LTIP dividend claw back upon cancellation — — — — — — — — — — — — — — 4

Redemption/conversion of operating partnership units — — 868 9 4,575 — — 4,584 — — — — — — ( 4,584 )

Net income (loss) — — — — — 17,761 2,063 19,824 — — — — — — ( 476 )

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

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

Redemptions of preferred stock — — — — — — — — — — ( 14 ) ( 365 ) ( 5 ) ( 134 ) —

Redemption value adjustment - preferred stock — — — — — ( 6,954 ) — ( 6,954 ) — — — 6,275 — 679 —

Redemption value adjustment — — — — — 205 — 205 — — — — — — ( 205 )

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

Purchase of common stock — — ( 1,773 ) ( 17 ) ( 7,448 ) — — ( 7,465 ) — — — — — — —

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

Equity-based compensation — — — — 5,475 — — 5,475 — — — — — — 5,810

Issuance of common stock — — 6,000 60 34,944 — — 35,004 — — — — — — —

Issuance of preferred stock — — — — — — — — — — 10,961 245,827 1,404 33,922 —

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

8.25 % Series D Cumulative

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Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at December 31, 2022 1,600 $ 16 69,919 $ 699 $ 734,134 $ ( 324,740 ) $ ( 16,346 ) $ 393,763 3,078 $ 65,426 12,657 $ 291,076 1,428 $ 35,182 $ 40,555

Purchase of common stock — — ( 3,969 ) ( 40 ) ( 19,214 ) — — ( 19,254 ) — — — — — — —

Equity-based compensation — — — — 3,564 — — 3,564 — — — — — — 5,680

Issuance of preferred stock — — — — — — — — — — 3,931 88,448 542 13,051 —

Issuance of restricted shares/units — — 689 7 14 — — 21 — — — — — — —

Forfeiture of restricted common shares — — ( 3 ) — — — — — — — — — — — —

PSU dividend claw back upon cancellation — — — — — 7 — 7 — — — — — — —

Dividends declared - common stock - $ 0.20 /share)

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Distributions to noncontrolling interests — — — — — — ( 3,724 ) ( 3,724 ) — — — — — — ( 1,444 )

Performance LTIP dividend claw back upon cancellation — — — — — — — — — — — — — — 4

Redemption/conversion of operating partnership units — — — — — — — — — — — — — — ( 7,162 )

Net income (loss) — — — — — ( 27,017 ) 1,619 ( 25,398 ) — — — — — — ( 5,230 )

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Net income (loss) $ ( 30,628 ) $ 19,348 $ ( 32,911 )

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

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

Depreciation and amortization 93,272 78,122 73,762

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Bad debt expense 915 838 436

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

Amortization of loan costs, discounts and capitalized default interest 2,195 ( 816 ) ( 205 )

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

Net settlement of trading derivatives — — 698

Equity in (earnings) loss of unconsolidated entity 253 328 252

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Proceeds from hotel management agreement amendment — 1,667 —

Payments for initial franchise fee ( 75 ) — —

Acquisition of hotel properties, net of cash and restricted cash acquired — ( 354,445 ) ( 17,615 )

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Payments for dividends and distributions ( 52,563 ) ( 20,763 ) ( 9,088 )

Proceeds from issuance of preferred stock 278,621 36,855 474

Net proceeds from issuance of preferred stock 97,862 278,621 36,855

Proceeds from issuance of common stock — — 102,461

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Contributions from noncontrolling interest in consolidated entities 9,517 164 1,189

Redemption of operating partnership units ( 7,162 ) — —

Distributions to noncontrolling interest in consolidated entities ( 2,693 ) — —

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Issuance of common stock for hotel acquisition — 35,040 —

Non-cash loan proceeds associated with accrued interest — — 2,229

Distributions declared but not paid to a noncontrolling interest in a consolidated entity 2,024 — —

Non-cash loan principal associated with default interest and late charges — — 9,859

Non-cash extinguishment of preferred stock — — 41,523

Distributions declared but not paid to a noncontrolling interest in a consolidated entity — 2,024 —

Issuance of common stock from preferred stock exchange — — 46,118

Accrued common stock offering expense — — 76

Unsettled common stock offering proceeds — — 68

Accrued preferred stock offering expenses — 23 101

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Unsettled proceeds from derivatives 361 330 —

Non-cash PSU dividends

SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

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Braemar conducts its business and owns substantially all of its assets through its operating partnership, Braemar Hospitality Limited Partnership (“Braemar OP”).

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

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

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

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We do not operate any of our hotel properties directly;

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

Remington Hotels, a subsidiary of Ashford Inc., manages four of our 16 hotel properties.

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

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

Third-party management companies manage the remaining hotel properties.

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has an ownership interest.

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

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

The accompanying consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of December 31, 2023, own 16 hotel properties in seven states, the District of Columbia, Puerto Rico and the U.S.

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Lease revenue from Braemar TRS is eliminated in consolidation.

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

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

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

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

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

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

Significant Accounting Policies

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

A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE.

All major decisions related to Braemar OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly-owned subsidiary, Braemar OP General Partner LLC (formerly Ashford Prime OP General Partner LLC), its general partner.

the VIE or the right to receive benefits from the VIE.

All major decisions related to Braemar OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly owned subsidiary, Braemar OP General Partner LLC (formerly Ashford Prime OP General Partner LLC), its general partner.

As such, we consolidate Braemar OP.

The following items affect reporting comparability of our historical consolidated financial statements:

• on August 5, 2021, we acquired the Mr.

C Beverly Hills Hotel and five adjacent luxury residences.

• On August 4, 2021, we acquired the Cameo Beverly Hills (formerly known as “Mr.

Beverly Hills Hotel”) and five adjacent luxury residences.

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

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Investments in Hotel Properties, net —Hotel properties are generally stated at cost.

For hotel properties owned through our majority-owned entities, the carrying basis attributable to the partners’ minority ownership is recorded at historical cost, net of any impairment charges, while the carrying basis attributable to our majority ownership is recorded based on the allocated purchase price of our ownership interests in the entities.

All improvements and additions which extend the useful life of the hotel properties are capitalized.

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

No such impairment was recorded for the years ended December 31, 2022, 2021 and 2020.

Our investment in unconsolidated entity is considered to be a variable interest in the underlying entity.

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Intangible Assets, net —Intangible assets, net represents the customer relationships associated with The Ritz-Carlton Sarasota acquisition, which are amortized using the straight-line method over its expected useful life, which approximates amortization based on economic consumption.

Derivative Instruments —We use interest rate derivatives to hedge our risks and to capitalize on the historical correlation between changes in LIBOR (London Interbank Offered Rate), SOFR (Secured Overnight Financing Rate) and RevPAR.

Derivative Instruments —We use interest rate derivatives to hedge our risks and to capitalize on the historical correlation between changes in SOFR (Secured Overnight Financing Rate) and RevPAR.

Interest rate derivatives could include swaps, caps, floors and flooridors.

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Taxes specifically collected from customers and submitted to taxing authorities are not recorded in revenue.

Interest income is recognized when earned.

Other Hotel Expenses —Other hotel expenses include Internet, telephone charges, guest laundry, valet parking, hotel-level general and administrative, sales and marketing expenses, repairs and maintenance, franchise fees and utility costs.

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This results in the recording of expense, included in “advisory services fee,” “management fees” and “corporate general and administrative” expense, equal to the ratable amount of the grant date fair value based on the requisite service period satisfied during the period.

The 2020 PSU and Performance LTIP unit grants to certain executive officers vest based on time and market conditions and were measured at the grant date fair value based on a Monte Carlo simulation valuation model.

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

The Company recognizes forfeitures as they occur.

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

The performance criteria are based on performance conditions under the relevant literature.

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

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

The compensation expense may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.

Depreciation and Amortization —Hotel properties are depreciated over the estimated useful life of the assets and leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related assets.

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federal income taxes.

The partnerships’ revenues and expenses pass through to and are taxed on the owners.

Partnerships are not subject to U.S.

federal income tax on their income.

Instead, each of its partners is required to include in income its allocable share of the partnership’s income.

The states and cities where the partnerships operate follow the U.S.

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We and our subsidiaries file income tax returns in the U.S.

federal jurisdiction and various states and cities.

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

federal jurisdiction, USVI, Puerto Rico and various states and cities.

Tax years 2019 through 2023 remain subject to potential examination by certain federal, foreign and state taxing authorities.

Income (Loss) Per Share —Basic income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding during the period using the two-class method prescribed by applicable authoritative accounting guidance.

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Diluted income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share.

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Entity’s Own Equity (Subtopic 815-40):

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

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

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.

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

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

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Total 16 $ 464,899 $ 185,331 $ 89,113 $ 739,343

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Year Ended December 31, 2022

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California 6 $ 134,635 $ 45,952 $ 19,152 $ 199,739

Puerto Rico 1 38,077 14,238 8,931 61,246

Arizona 1 3,107 1,430 657 5,194

Colorado 1 25,253 16,397 8,965 50,615

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Total 16 $ 431,515 $ 159,241 $ 78,829 $ 669,585

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Year Ended December 31, 2021

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Total 14 $ 280,568 $ 90,299 $ 56,675 $ 427,542

For the year ended December 31, 2020, the Company recorded revenue from business interruption losses associated with lost profits from Hurricane Irma of $ 4.0 million.

This revenue is included in “other” hotel revenue in our consolidated statement of operations.

There was no such revenue recorded for the years ended December 31, 2022 and 2021 as the insurance claim was fully settled in 2020.

Investments in Hotel Properties, net

10 unchanged sentences

For the years ended December 31, 2023, 2022 and 2021, depreciation expense was $ 92.6 million, $ 78.0 million and $ 73.0 million, respectively.

Impairment Charges and Insurance Recoveries

For the year ended December 31, 2020, the Company received proceeds of $ 14.5 million from our insurance carriers for property damage and business interruption from Hurricane Irma.

In September 2020, the Company reached a final settlement with its insurance carriers related to Hurricane Irma.

Upon settlement, the Company recorded a gain of $ 10.1 million as the proceeds received exceeded the carrying value of the hotel property at the time of the loss.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the year ended December 31, 2021, we recognized a gain of $ 481,000 associated with proceeds received from an insurance claim.

There was no such gain recognized for the year ended December 31, 2022.

Impairment Charges

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

The Ritz-Carlton Reserve Dorado Beach

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

The total consideration consisted of $ 104.0 million of cash and 6.0 million shares of the Company’s common stock with a fair value of approximately $ 35.0 million.

Additionally, the Company assumed a $ 54.0 million mortgage loan with a fair value of approximately $ 58.6 million.

See note 6 for further discussion regarding the mortgage loan.

On March 14, 2022, the Company filed a resale registration statement on Form S-3, which was declared effective by the SEC on April 1, 2022, to register for resale the 6.0 million shares of common stock.

We accounted for this acquisition as an asset acquisition because substantially all of the fair value of the gross assets acquired were concentrated in a group of similar identifiable assets.

The cost of the acquisition including transaction costs of approximately $ 1.9 million, was allocated to the individual assets acquired and liabilities assumed on a relative fair value basis, which is considered a Level 3 valuation technique.

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

Land $ 79,711

Buildings and improvements 102,105

Furniture, fixtures and equipment 15,405

Investments in hotel properties 197,221

Restricted cash 1,091

Inventories 1,184

Mortgage loan ( 58,601 )

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

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

The table below summarizes the total revenue and net income (loss) in our consolidated statements of operations for the year ended December 31, 2022:

Year Ended December 31, 2022

Total revenue $ 61,246

Net income (loss) 7,583

Four Seasons Resort Scottsdale

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

The total consideration for the acquisition was $ 267.8 million.

We accounted for this acquisition as an asset acquisition because substantially all of the fair value of the gross assets acquired were concentrated in a group of similar identifiable assets.

The cost of the acquisition including transaction costs of approximately $ 538,000 , was allocated to the individual assets acquired and liabilities assumed on a relative fair value basis, which is considered a Level 3 valuation technique.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Land $ 70,248

Buildings and improvements 181,560

Furniture, fixtures and equipment 16,050

Investments in hotel properties 267,858

Inventories 480

Net other assets (liabilities) $ ( 691 )

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

The table below summarizes the total revenue and net income (loss) in our consolidated statements of operations for the year ended December 31, 2022:

Year Ended December 31, 2022

Total revenue $ 5,194

Net income (loss) 934

Investment in Unconsolidated Entity

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

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

OpenKey, Inc.

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

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

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

In 2022, the Company made additional investments in OpenKey of approximately $ 328,000 .

As of December 31, 2022, the Company has made investments in OpenKey totaling $ 2.9 million.

Our investment is recorded as “investment in unconsolidated entity” in our consolidated balance sheets and is accounted for under the equity method of accounting as we have significant influence over the entity under the applicable accounting guidance.

7 unchanged sentences

Ownership interest in OpenKey 7.9 % 7.9 %

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

2 unchanged sentences

Equity in earnings (loss) of unconsolidated entity $ ( 273 ) $ ( 328 ) $ ( 252 )

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Per the agreement, Ashford Inc.

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

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

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

As of December 31, 2023, the Company has funded approximately $ 238,000 .

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

Line Item December 31, 2023 December 31, 2022

Investment in unconsolidated entity $ 258 $ —

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

Year Ended December 31,

Line Item 2023 2022 2021

Equity in earnings (loss) of unconsolidated entity $ 20 $ — $ —

Indebtedness, net

Indebtedness, net consisted of the following (dollars in thousands):

Indebtedness Collateral Current Maturity Final

Current Maturity

Maturity (16)

Interest Rate December 31, 2022 December 31, 2021

Debt Balance Book Value of Collateral Debt Balance Book Value of Collateral

Mortgage loan (3)

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

$ — $ — $ 67,500 $ 137,718

Interest Rate

December 31, 2023 December 31, 2022

Book Value of Collateral

Mortgage loan (4)

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

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

$ — — $ 40,000 51,514

Mortgage loan (4)

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

The Ritz-Carlton Sarasota October 2023 April 2024 LIBOR (1) + 2.65 %

— — 98,500 162,134

Mortgage loan (4)

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

Hotel Yountville November 2023 May 2024 LIBOR (1) + 2.55 %

— — 51,000 84,180

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

Mortgage loan (5)

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

Capital Hilton February 2024 February 2024 SOFR (2) + 1.70 %

— — 195,000 194,770

Hilton La Jolla Torrey Pines

Mortgage loan (5) (6)

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

Hilton La Jolla Torrey Pines February 2024 February 2024 SOFR (2) + 1.70 %

66,600 66,947 — —

Mortgage loan (7)

The Ritz-Carlton St.

Thomas August 2023 August 2024 LIBOR (1) + 3.95 %

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

70,500 140,966 70,500 139,830

Mortgage loan (8)

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

The Ritz-Carlton Reserve Dorado Beach March 2024 March 2026 LIBOR (1) + 6.00 %

— — 54,000 193,367

Mortgage loan (9)

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

The Notary Hotel June 2024 June 2025 SOFR (2) + 2.66 %

293,180 378,335 435,000 403,896

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

Mortgage loan (10)

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

Cameo Beverly Hills August 2024 August 2024 SOFR (2) + 3.66 %

30,000 71,196 30,000 71,820

Hilton La Jolla Torrey Pines

Mortgage loan (11) (12)

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

The Ritz-Carlton St.

Thomas August 2024 August 2024 SOFR (2) + 4.04 %

42,500 114,224 42,500 119,492

Mortgage loan (13)

The Ritz-Carlton Reserve Dorado Beach March 2024 March 2026 LIBOR (1) + 6.00 %

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

80,000 81,806 80,000 83,361

Mortgage loan (14)

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

The Ritz-Carlton Lake Tahoe January 2025

January 2026 SOFR (2) + 3.60 %

53,413 132,467 54,000 112,777

Mortgage loan (4) (11)

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

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

BAML Credit Facility (4)

Bardessono Hotel and Spa July 2026 July 2027 Base Rate (3) + 1.25 % to 2.00 % or

SOFR (2) + 2.35 % to 3.10 %

200,000 303,405 — —

Hotel Yountville

The Ritz-Carlton Sarasota

Mortgage loan (15)

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

Four Seasons Resort Scottsdale December 2026 December 2028 SOFR (2) + 3.75 %

140,000 261,737 100,000 267,460

Mortgage loan (5)

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

Capital Hilton December 2026 December 2028 SOFR (2) + 3.75 %

110,600 143,840 — —

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

1,173,043 $ 1,694,923 1,336,750 $ 1,884,601

Capitalized default interest and late charges, net 1,934 3,904

Capitalized default interest

and late charges, net

Deferred loan costs, net ( 9,135 ) ( 5,054 )

2 unchanged sentences

__________________

(1) LIBOR rates were 4.392 % and 0.101 % at December 31, 2022 and December 31, 2021, respectively.

(2) SOFR rate was 4.358 % at December 31, 2022.

(3) On February 2, 2022, we refinanced this mortgage loan totaling $ 67.5 million with a new $ 70.5 million mortgage loan with a two-year initial term and three one-year extension options, subject to the satisfaction of certain conditions.

The new mortgage loan is interest only and bears interest at a rate of SOFR + 2.86 %.

(4) This mortgage loan has a LIBOR floor of 0.25 %.

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

(6) On October 27, 2022, we amended this mortgage loan.

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

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

This mortgage loan has a LIBOR floor of 1.00 %.

(1) LIBOR rate was 4.39 % at December 31, 2022.

(2) SOFR rates were 5.35 % and 4.36 % at December 31, 2023 and December 31, 2022, respectively.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(3) Base Rate, as defined in the secured credit facility agreement, is the greater of (i) the prime rate set by Bank of America, (ii) federal funds rate + 0.50 %, (iii) Term SOFR + 1.00 %, or (iv) 1.00 %.

(4) On July 31, 2023, we entered into a new $ 200.0 million secured credit facility comprised of a $ 150.0 million term loan and a $ 50.0 million secured revolving credit facility with a three-year initial term and one one-year extension option, subject to satisfaction of certain conditions.

The new facility is interest only and bears interest at a rate of SOFR + 2.35 % to 3.10 %.

Proceeds from the facility were used to repay the mortgage loans secured by Bardessono Hotel & Spa, Hotel Yountville, and The Ritz-Carlton Sarasota.

(5) On December 22, 2023, we entered into a new $ 110.6 million loan secured by Capital Hilton.

The new mortgage loan is interest only and bears interest at a rate of SOFR + 3.75 %, has a three-year initial term and two one-year extension options, subject to satisfaction of certain conditions, and has a SOFR floor of 2.00 %.

The Hilton La Jolla Torrey Pines remains encumbered by the original mortgage loan, which was partially paid down to a remaining balance of $ 66.6 million.

(6) On February 5, 2024, we amended this mortgage loan.

Terms of the amendment included extending the maturity date by six months from February 2024 to August 2024, and converting the interest rate from a variable rate of SOFR + 1.70 % to a fixed rate of 9.00 %.

(7) This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised February 2024.

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

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

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

This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate increased from LIBOR + 2.61 % to SOFR + 2.66 %.

(10) This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate increased from LIBOR + 3.60 % to SOFR + 3.66 %.

This mortgage loan has a SOFR floor of 1.50 %.

(11) This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in August 2023.

This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate increased from LIBOR + 3.95 % to SOFR + 4.04 %.

This mortgage loan has a SOFR floor of 1.00 %.

(12) On January 29, 2024, we amended this mortgage loan.

Terms of the amendment included extending the current maturity date one year to August 2025, and the variable rate increased from SOFR + 4.04 % to SOFR 4.35 %.

This amended mortgage loan has one one-year extension option, subject to satisfaction of certain conditions.

This mortgage loan has a SOFR floor of 4.00 %.

(13) On January 3, 2024, we amended this mortgage loan.

Terms of the amendment included extending the current maturity date one year to September 2025, and the variable rate increased from SOFR + 1.95 % to SOFR + 3.60 %.

This amended mortgage loan has one one-year extension option, subject to satisfaction of certain conditions.

(14) On October 31, 2023, we amended this mortgage loan.

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

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

This mortgage loan has a LIBOR floor of 0.75 %.

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

Terms of the amendment included extending the current maturity date one year to January 2025, and the variable interest rate increased from SOFR + 2.20 % to SOFR + 3.60 %.

This amended mortgage loan has one one-year extension option, subject to satisfaction of certain conditions.

(15) On September 29, 2023, we amended this mortgage loan.

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

(12) On December 23, 2022, we entered into a new $ 100 million mortgage loan with a three-year initial term and two one-year extension options, subject to satisfaction of certain conditions.

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

Terms of the amendment included increasing the outstanding principal from $ 100.0 million to $ 140.0 million, and extending the current maturity date by one year to December 2026.

This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions.

This mortgage loan has a SOFR floor of 1.00 %.

(13) The final maturity date assumes all available extensions options will be exercised.

During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront, Capital Hilton and Hilton La Jolla Torrey Pines.

(16) The final maturity date assumes all available extension options will be exercised.

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

The Company determined that all of the forbearance and other agreements evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges.

As a result of the troubled debt restructurings, all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

amount of default interest and late charges capitalized into indebtedness for the year ended December 31, 2020 was $ 9.9 million.

The amount of principal amortization was approximately $ 2.0 million, $ 3.4 million and $ 2.6 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

On March 11, 2022, in connection with the acquisition of The Ritz-Carlton Reserve Dorado Beach, the Company assumed a $ 54 million mortgage loan.

On December 23, 2022, the Company entered into a new $ 100 million mortgage loan associated with Four Seasons Resort Scottsdale with a three-year initial term and two one-year extension options, subject to satisfaction of certain conditions.

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

This mortgage loan has a SOFR floor of 1.00 %.

The amount of amortized principal was approximately $ 1.7 million, $ 2.0 million and $ 3.4 million, respectively, for the years ended December 31, 2023, 2022 and 2021.

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.

Convertible Senior Notes

5 unchanged sentences

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

The Company recorded coupon interest expense of $ 3.9 million and $ 2.4 million for the years ended December 31, 2022 and 2021, respectively.

Upon issuance of the Convertible Senior Notes, the Company separated the Convertible Senior Notes into liability and equity components.

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

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

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

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

The initial discount of $ 9.3 million was accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Senior Notes.

The Company recorded discount amortization of $ 553,000 and $ 974,000 related to the initial purchase discount for the years ended December 31, 2022 and 2021, with the remaining discount balance to be amortized through June 2026.

As a result of the Company's adoption of ASU 2020-06 on January 1, 2022, the Convertible Senior Notes are now recorded as a single liability with no portion recorded in equity.

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

For the years ended December 31, 2023, 2022 and 2021, the Company recorded coupon interest expense of $ 3.9 million, $ 3.9 million and $ 2.4 million, respectively.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the years ended December 31, 2023, 2022 and 2021, the Company recorded discount amortization of $ 589,000 , $ 553,000 and $ 974,000 , respectively, related to the initial purchase discount, with the remaining discount balance to be amortized through June 2026.

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

1 unchanged sentence

The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100 % of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.

If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all.

The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group.

As of December 31, 2022, we were in compliance with all covenants.

Credit Facility

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 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.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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 executed loan amendment documents and instead deferred to original loan documents that dictate changes in index rates.

The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group.

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

Maturities and scheduled amortization of indebtedness as of December 31, 2023, assuming no extension of existing extension options for each of the following five years and thereafter are as follows (in thousands):

6 unchanged sentences

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

5 unchanged sentences

Strike rate high end of range 5.25 % 4.50 % 4.00 %

Effective date range February 2022 - December 2022 January 2021 - September 2021 March 2020 - June 2020

Termination date range May 2023 -January 2025 February 2022 - August 2024 April 2021 - June 2021

Effective date range January 2023 - December 2023

February 2022-December 2022 January 2021 - September 2021

Termination date range January 2024 - January 2026

May 2023- January 2025 February 2022 - August 2024

Total cost of interest rate caps (in thousands) $ 5,051 $ 3,030 $ 200

7 unchanged sentences

Strike rate high end of range 5.25 % 4.50 %

Termination date range January 2023 - January 2025 February 2022 - August 2024

Termination date range January 2024 - January 2025

January 2023- January 2025

Aggregate principal balance on corresponding mortgage loans (in thousands) $ 777,693 $ 959,000

1 unchanged sentence

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

Warrants —On August 5, 2021, as part of the consideration paid to acquire the Mr.

Warrants —On August 5, 2021, as part of the consideration paid to acquire the Cameo Beverly Hills (formerly known as the Mr.

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

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

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

As of December 31, 2023, no warrants have been exercised.

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

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

three -year contractual term;

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The warrants are re-valued at each reporting period with the change in fair value recorded through earnings.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

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

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

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

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

In determining the fair values of our derivatives at December 31, 2022, the LIBOR/SOFR interest rate forward curve (Level 2 inputs) assumed an uptrend from 4.392 % to 4.790 % for the remaining term of our derivatives.

In determining the fair values of our derivatives at December 31, 2023, the SOFR interest rate forward curve (Level 2 inputs) assumed a downtrend from 5.352 % to 3.403 % for the remaining term of our derivatives.

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

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Net $ — $ 2,835 $ — $ 2,835

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Quoted Market Prices (Level 1) Significant Other

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Interest rate derivatives - caps $ ( 935 ) $ 3,810 $ ( 62 )

Credit default swaps — — 117 (2)

Total derivative assets $ 3,810 $ ( 62 ) $ 24

Total $ ( 935 ) $ 3,810 $ 55

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Total combined

Interest rate derivatives - floors $ — $ — $ 3,615

Interest rate derivatives - caps $ ( 8,685 ) $ 3,313 ( 62 )

Credit default swaps — — 1,437

Warrants 272 1,151 94

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Realized gain (loss) on interest rate caps 7,750 (1) (2)

Realized gain (loss) on credit default swaps — — ( 1,320 ) (3)

Realized gain (loss) on interest rate floors — — ( 3,615 ) (3)

Net $ ( 663 ) $ 4,961 $ 32

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

(2) Excludes costs associated with credit default swaps of $ 191,000 for the year ended December 31, 2020, which is included in “other income (expense)” in our consolidated statements of operations.

(3) Included in “other income (expense)” in our consolidated statements of operations.

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

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Determining the estimated fair values of certain financial instruments such as indebtedness requires considerable judgment to interpret market data.

The use of different market assumptions and/or estimation methodologies may have a material effect

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

on the estimated fair value amounts.

The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

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

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Financial liabilities not measured at fair value:

Indebtedness $ 1,337,250 $ 1,229,671 to $ 1,359,110

$ 1,172,312 $ 1,022,408 to $ 1,130,029

Indebtedness $ 1,171,459 $ 1,124,377 $ 1,337,250 $ 1,294,391

Accounts payable and accrued expenses 149,867 149,867 133,978 133,978

Dividends and distributions payable 9,158 9,158 8,184 8,184

Due to Ashford Inc., net 10,005 10,005 1,474 1,474

Due to Ashford Inc.

1,471 1,471 10,005 10,005

Due to related parties, net 603 603 — —

Due to third-party hotel managers 1,608 1,608 2,096 2,096

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cash, cash equivalents and restricted cash .

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This is considered a Level 1 valuation technique.

Accounts receivable, net, due from related parties, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc.

and due to/from third-party hotel managers .

Accounts receivable, net, due to/from related parties, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc and due to/from third-party hotel managers .

The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments.

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

We estimated the fair value of the total indebtedness to be approximately 92.0 % to 101.6 % of the carrying value of $ 1.3 billion at December 31, 2022, and approximately 87.2 % to 96.4 % of the carrying value of $ 1.2 billion at December 31, 2021.

We estimated the fair value of the total indebtedness to be approximately 96.0 % of the carrying value of $ 1.2 billion at December 31, 2023, and approximately 96.8 % of the carrying value of $ 1.3 billion at December 31, 2022.

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Income (Loss) Per Share

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Distributed and undistributed net income (loss) - basic and diluted

$ ( 74,299 ) $ ( 10,763 ) $ ( 39,861 )

Weighted average common shares outstanding:

Weighted average common shares outstanding – basic and diluted 69,687 52,684 33,998

Weighted average common shares outstanding – basic 65,989 69,687 52,684

Weighted average common shares outstanding – diluted 65,989 69,687 52,684

Income (loss) per share - basic:

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Net income (loss) allocated to common stockholders per share $ ( 1.13 ) $ ( 0.15 ) $ ( 0.76 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Total 165,060 61,768 19,884

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Redeemable Noncontrolling Interests in Operating Partnership

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

As of December 31, 2022, there were approximately 2.0 million Performance LTIP units, representing 200 % of the target, outstanding.

With respect to the 2020 award agreements, the number of Performance LTIP units to be earned ranged from 0 % to 200 % of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date.

The performance criteria for the Performance LTIP units are based on market conditions under the relevant literature.

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

During the year end December 31, 2022, approximately 113,000 Performance LTIP units granted in 2020 were canceled due to the market conditions criteria not being met.

As of December 31, 2023, there were approximately 1.5 million unvested Performance LTIP units, representing 200 % of the target, outstanding.

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

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

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

As of December 31, 2022, we have issued a total of approximately 3.5 million LTIP and Performance LTIP units, net of Performance LTIP cancellations.

All LTIP and Performance LTIP units, other than approximately 569,000 LTIP units and 840,000 Performance LTIP units issued from March 2015 to May 2021, had reached full economic parity with, and are convertible into, common units.

The performance criteria for the 2021, 2022 and 2023

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

performance grants are based on performance conditions under the relevant literature.

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

As of December 31, 2023, approximately 840,000 Performance LTIP units granted in 2021, deemed to have met the performance conditions, became fully vested at 200 % of the target.

As of December 31, 2023, we have issued a total of approximately 3.0 million LTIP and Performance LTIP units, net of Performance LTIP cancellations.

All LTIP and Performance LTIP units, other than approximately 614,000 LTIP units and 353,000 Performance LTIP units issued from March 2015 to May 2023, had reached full economic parity with, and are convertible into, common units.

The following table presents compensation expense for Performance LTIP units and LTIP units (in thousands):

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The unamortized cost of the unvested Performance LTIP units of approximately $ 2.7 million at December 31, 2023 will be expensed over a period of 2.0 years with a weighted average period of 1.2 years.

The unamortized cost of the unvested LTIP units of approximately $ 1.3 million at December 31, 2022, will be amortized over a period of 1.2 years with a weighted average period of 1.2 years.

The unamortized cost of the unvested LTIP units of approximately $ 211,000 at December 31, 2023, will be amortized over a period of 0.2 years with a weighted average period of 0.2 years.

A summary of the activity of the units in our operating partnership is as follows (in thousands):

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Units redeemed for shares of common stock — — ( 868 )

Units redeemed for cash ( 1,456 ) — —

Performance LTIP units cancelled — ( 113 ) ( 60 )

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December 31, 2023 December 31, 2022

Redeemable noncontrolling interests in Braemar OP $ 40,555 $ 36,087

Adjustments to redeemable noncontrolling interests (1)

Redeemable noncontrolling interests in Braemar OP (in thousands) $ 32,395 $ 40,555

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

Ownership percentage of operating partnership 6.63 % 7.69 %

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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The historical cost of the converted units was $ 4.6 million.

(2) The redemption value is the greater of historical cost or fair value.

The historical cost of the converted units was $ 4.6 million.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the common units redeemed for cash (in thousands):

Year Ended December 31,

2023 2022 2021

Units redeemed

Cash value of common units redeemed

____________________________________

(1) Includes Mr.

Bennett’ s 1.4 million common units redeemed for cash of approximately $ 7.0 million during February 2023.

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

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In general, Series D cumulative preferred stockholders have no voting rights.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Series D Preferred Stock dividend for all issued and outstanding shares is set at $ 2.0625 per annum per share.

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

No shares were repurchased under any stock repurchase program during the years ended December 31, 2021 and 2020.

As of December 31, 2022, $ 18.9 million remains authorized by the board of directors pursuant to the December 7, 2022 approval.

See note 22 .

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

As of December 31, 2023, the Company has completed the $ 25 million repurchase authorization.

We repurchased approximately 83,000 , 262,000 and 50,000 shares of our common stock in 2023, 2022 and 2021, respectively, to satisfy employees’ statutory minimum U.S.

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As of December 31, 2023, the Company has sold approximately 7.4 million shares of common stock and received net proceeds of approximately $ 30.5 million under this program.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The issuance activity is summarized below (in thousands):

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during regular trading hours.

The agreement terminated on February 4, 2024.

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”).

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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 December 31, 2022, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $ 10.0 million under the SEDA.

The issuance activity under the SEDA is summarized below (in thousands):

Year Ended December 31,

Common shares sold to YA — 1,700

Proceeds received $ — $ 10,000

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

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

As of December 31, 2022, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $ 4.2 million under the Lincoln Park Purchase Agreement.

We are not required to pay any

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The issuance activity under the Lincoln Park Purchase Agreement is summarized below (in thousands):

additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $ 10,000 structuring fee.

As of December 31, 2023, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $ 10.0 million under the SEDA.

The issuance activity under the SEDA is summarized below (in thousands):

Year Ended December 31,

Common shares sold to Lincoln Park — 766

Additional commitment shares — 15

Total common shares issued to Lincoln Park — 781

2023 2022 2021

Common shares sold to YA — — 1,700

Proceeds received $ — $ — $ 10,000

At-the-Market Equity Distribution Agreement —On May 25, 2021, the Company entered into an equity distribution agreement (the “Virtu May 2021 EDA”) with Virtu Americas LLC (“Virtu”), to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $ 50 million.

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

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

As of December 31, 2022, all shares of common stock under the Virtu May 2021 EDA have been sold.

The issuance activity under the Virtu May 2021 EDA is summarized below (in thousands):

Year Ended December 31,

Common shares issued — 8,339

Gross proceeds received $ — $ 50,000

Commissions — 500

Net proceeds $ — $ 49,500

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

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Year Ended December 31,

2023 2022 2021

Common shares issued — — 4,712

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(Income) loss from consolidated entities attributable to noncontrolling interests $ ( 1,619 ) $ ( 2,063 ) $ 2,650

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Redeemable Preferred Stock

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1) an optional redemption in which on or after June 11, 2020, the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $ 25.00 per share, plus any accumulated, accrued and unpaid dividends;

2) a special optional redemption, in which on or prior to the occurrence of a Change of Control (as defined in the Articles Supplementary), the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $ 25.00 per share;

2) a special optional redemption, in which on or prior to the occurrence of a Change of Control (as defined in the Articles

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Supplementary), the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $ 25.00 per share;

and 3) a “REIT Termination Event” and “Listing Event Redemption,” in which at any time (i) a REIT Termination Event (as defined below) occurs or (ii) the Company’s common stock fails to be listed on the NYSE, NYSE American, or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor thereto (each, a “National Exchange”), the holder of Series B Convertible Preferred Stock shall have the right to require the Company to redeem any or all shares of Series B Convertible Preferred Stock at 103 % of the liquidation preference ($ 25.00 per share, plus any accumulated, accrued, and unpaid dividends) in cash.

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

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

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

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

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As of December 31, 2023, we have sold approximately 65,000 shares of our Series B Convertible Preferred Stock and received proceeds of approximately $ 1.2 million under this program.

The issuance activity is summarized below (in thousands):

Year Ended December 31,

2022 2021 2020

Series B Convertible Preferred Stock shares issued — — 23

Gross proceeds received $ — $ — $ 439

Commissions — — 7

Net proceeds $ — $ — $ 432

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Series B Convertible Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside our control.

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Series B Convertible Preferred Stock

There were no preferred stock exchanges for the year ended December 31, 2022.

There were no preferred stock exchanges for the years ended December 31, 2023 and 2022.

Series E Redeemable Preferred Stock

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

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

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

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

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

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

the Series D Preferred Stock and the Series M Preferred Stock (as defined below)) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.

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

If and whenever dividends on any shares of the Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive the number of directors then constituting the board shall be increased by two and the holders of such shares of Series E Preferred Stock shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

If and whenever dividends on any shares of the Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive, the number of directors then constituting the board shall be increased by two and the holders of such shares of Series E Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series E Preferred Stock) shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

Each share is redeemable at any time, at the option of the holder, at a redemption price of $ 25.00 per share, plus any accumulated, accrued and unpaid dividends, less a redemption fee.

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption.

The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal number of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption.

The Series E Preferred Stock cash dividends are as follows:

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• 7.50 % per annum of the Stated Value beginning on the second anniversary from the Date of Initial Closing.

Dividends will be authorized and declared on a monthly basis and payable in arrears on the 15th day of each month to holders of record at the close of business on the last business day of each month immediately preceding the applicable thereafter dividend payment date.

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

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

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

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

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

Year Ended December 31,

2023 2022 2021

Series E Preferred Stock shares issued (1)

3,798 10,914 1,709

Net proceeds (1)

$ 85,444 $ 245,575 $ 38,450

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

__________________

(1) Exclusive of shares issued under the DRIP.

The Series E Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside of the Company’s control.

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At the date of issuance, the carrying amount of the Series E Preferred Stock was less than the redemption value.

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Series E Preferred Stock $ 377,035 $ 291,076

Adjustments to Series E Preferred Stock (1)

Cumulative adjustments to Series E Preferred Stock (1)

$ 13,337 $ 9,403

2 unchanged sentences

Year Ended December 31,

2023 2022 2021

Series E Preferred Stock $ 30,883 $ 12,694 $ 683

1 unchanged sentence

Year Ended December 31,

2023 2022 2021

Series E Preferred Stock shares redeemed 272 14 $ —

Redemption amount, net of redemption fees $ 6,423 $ 365 $ —

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Series M Redeemable Preferred Stock

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

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

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

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

The Company is also offering a maximum of 8,000,000 shares of Series M Preferred Stock pursuant to the DRIP at $ 25.00 per share.

1 unchanged sentence

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

If and whenever dividends on any shares of Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive the number of directors then constituting the board shall be increased by two and the holders of such shares of Series M Preferred Stock shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

If and whenever dividends on any shares of Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive, the number of directors then constituting the board shall be increased by two and the holders of such shares of Series M Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series M Preferred Stock) shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

Each share is redeemable at any time, at the option of the holder, at a redemption price of $ 25.00 per share, plus any accumulated, accrued and unpaid dividends, less a redemption fee.

2 unchanged sentences

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The redemption fee shall be an amount equal to:

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

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

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

1 unchanged sentence

Holders of Series M Preferred Stock are entitled to receive cumulative cash dividends at the initial rate of 8.2 % per annum of the Stated Value of $ 25.00 per share (equivalent to an annual dividend rate of $ 2.05 per share).

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

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

provided, however, that the dividend rate for any share of Series M Preferred Stock shall not exceed 8.7 % per annum of the Stated Value.

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

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

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

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

Year Ended December 31,

2023 2022 2021

Series M Preferred Stock shares issued (1)

1 unchanged sentence

$ 12,869 $ 34,009 $ 704

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

__________________

(1) Exclusive of shares issued under the DRIP.

The Series M Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside the Company’s control.

5 unchanged sentences

Series M Preferred Stock $ 45,623 $ 35,182

Adjustments to Series M Preferred Stock (1)

Cumulative adjustments to Series M Preferred Stock (1)

$ 1,597 $ 812

__________________

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

1 unchanged sentence

Year Ended December 31,

2023 2022 2021

Series M Preferred Stock $ 3,888 $ 1,276 $ 15

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Year Ended December 31,

2023 2022 2021

Series M Preferred Stock shares redeemed 137 5 —

5 unchanged sentences

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

At December 31, 2022, the unamortized cost of unvested shares of restricted stock was $ 1.5 million, which is expected to be recognized over a period of 1.2 years with a weighted average period of 1.0 years.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2023, the unamortized cost of unvested shares of restricted stock was $ 236,000 , which is expected to be recognized over a period of 0.2 years with a weighted average period of 0.2 years.

The following table summarizes the stock-based compensation expense for restricted stock (in thousands):

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

With respect to the 2020 award agreements, the number of PSUs to be earned ranged from 0 % to 200 % of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date.

The performance criteria for the PSUs are based on market conditions under the relevant literature.

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

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

During the years ended December 31, 2022, 2021 and 2020, approximately 225,000 PSUs granted in 2020, 223,000 PSUs granted in 2019 and 197,000 PSUs granted in 2018, were canceled due to the market condition criteria not being met.

As a result there was a claw back of the previously declared dividends in the amount of $ 7,000 , $ 143,000 and $ 202,000 , respectively.

The corresponding compensation cost is recognized ratably over the service period for the award as

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

During the years ended 2022 and 2021, 225,000 PSUs granted in 2020 and 223,000 PSUs granted in 2019, were canceled due to the market condition criteria not being met.

As a result there was a claw back of the previously declared dividends in the amount of $ 7,000 and $ 143,000 , respectively.

The following table summarizes the compensation expense for PSUs (in thousands):

2 unchanged sentences

Advisory services fee $ 2,108 $ 2,876 3,374

At December 31, 2022, the unamortized cost of unvested shares of PSUs was $ 1.9 million, which is expected to be recognized over a period of 2.0 years with a weighted average period of 1.1 years.

At December 31, 2023, the unamortized cost of unvested PSUs was $ 1.1 million, which is expected to be recognized over a period of 2.0 years with a weighted average period of 1.9 years.

A summary of our PSU activity is as follows (shares in thousands):

22 unchanged sentences

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

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

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

BRAEMAR HOTELS & RESORTS INC.

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

(3) The $( 678,000 )incentive fee in 2020 is a result of not meeting the FCCR threshold required for paying the final installment of the incentive fee incurred in 2018.

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

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

Treasury securities.

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

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

The fee is payable monthly in arrears.

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

The advisory agreement:

(i) allocates responsibility for certain employee costs between the Company and its advisor;

and (ii) permits the Company’s board of directors to issue annual equity awards in the Company or Braemar OP to employees and other representatives of its advisor based on achievement by the Company of certain financial or other objectives or otherwise as the Company’s board of directors sees fit.

Pursuant to the 2022 Limited Waiver, the Company, Braemar OP, Braemar TRS and the Company’s advisor waived the operation of any provision in the advisory agreement that would otherwise have limited our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2022 cash incentive compensation to employees and other representatives of our advisor.

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

Pursuant to the 2023 Limited Waiver, the Company, Braemar OP, Braemar TRS and the Company’s advisor waived the operation of any provision in the advisory agreement that would otherwise limit our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2023 cash incentive compensation to employees and other representatives of our advisor.

On March 11, 2024, we entered into a Limited Waiver Under Advisory Agreement with Ashford Inc.

and Ashford LLC (the “Advisory Agreement Limited Waiver”).

Pursuant to the Advisory Agreement Limited Waiver, the Company, the Operating Partnership, TRS and the Advisor waive the operation of any provision in our advisory agreement that would otherwise limit the ability of the Company in its discretion, at the Company’s cost and expense, to award during calendar year 2024, cash incentive compensation to employees and other representatives of the Advisor.

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

Under the advisory agreement, Ashford Inc.

secures casualty insurance policies to cover Braemar, Ashford Hospitality Trust, Inc.

(“Ashford Trust”), their hotel managers, as needed, and Ashford Inc.

secures casualty insurance policies to cover Ashford Trust, Braemar, Stirling OP, their hotel managers, as needed, and Ashford Inc.

The total loss estimates included in such policies are based on the collective pool of risk exposures from each party.

Ashford Inc.'s risk management department manages the casualty insurance program.

Each year Ashford Inc.'s risk management department collects funds from Braemar, Ashford Trust and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.

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

The advisory agreement (i) allocates responsibility for certain employee costs between the Company and its advisor and (ii) permits the Company’s board of directors to issue annual equity awards in the Company or Braemar OP to employees and other representatives of its advisor based on achievement by the Company of certain financial or other objectives or otherwise as the Company’s board of directors sees fit.

Pursuant to the Limited Waiver, the Company, Braemar OP, Braemar TRS and the Company’s advisor waived the operation of any provision in the advisory agreement that would otherwise limit its ability, in its discretion and at the Company’s cost and expense, to award during the first and second fiscal quarters of calendar year 2022 cash incentive compensation to employees and other representatives of its advisor.

On March 20, 2020, the Company entered into an agreement with Lismore, a subsidiary of Ashford Inc., to engage Lismore to seek modifications, forbearances or refinancings of the Company’s loans (the “Lismore Agreement”).

The Lismore Agreement was terminated effective March 20, 2021.

For the years ended December 31, 2021 and 2020, the Company recognized expense of $ 341,000 and $ 3.1 million.

These expenses are included in “write-off of loan costs and exit fees” in the consolidated statement of operations.

On August 25, 2020, in light of the fact that Lismore negotiated access to the FF&E reserves but no forbearance on debt service for the $ 435 million mortgage loan secured by the Marriott Seattle Waterfront, Sofitel Chicago Magnificent Mile, The Notary Hotel and The Clancy, the independent members of the board of directors of Ashford Inc.

waived $ 1.6 million of Lismore success fees.

The Company engaged Lismore to negotiate, on the Company’s behalf, one or more modifications to the terms of the mortgage loan assumed in connection with the acquisition of the Mr.

C Beverly Hills Hotel.

Upon closing of the hotel on August 5, 2021, the Company paid Lismore a fee of $ 150,000 .

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

Additionally, in connection with the closing of the Four Seasons Resort Scottsdale mortgage loan in December 2022, the Company paid Lismore a fee of approximately $ 750,000 .

has managed the casualty insurance program and beginning in December 2023, Warwick Insurance Company ("Warwick"), a subsidiary of Ashford Inc., provides and manages the general liability, workers’ compensation and business automobile insurance policies within the casualty insurance program.

Each year Ashford Inc.

collects funds from Ashford Trust, Braemar, Stirling OP and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis .

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

For the year ended December 31, 2023, we incurred fees of approximately $ 150,000 to Lismore in nonrefundable work fees and $ 214,000 of success fees.

The unamortized non-refundable work fees are included in “other assets” on the consolidated balance sheet, and are amortized on a straight line basis over the term of the agreements.

In addition to the fees described above, we incurred fees from Lismore or its subsidiaries of $ 2.1 million, $ 1.4 million and $ 491,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Ashford Securities

1 unchanged sentence

(“Ashford Securities”).

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

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

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

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

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

entered into a Second Amended and Restated Contribution Agreement which provided for an additional $ 18 million in expenses to be reimbursed with all expenses allocated 45 % to Ashford Trust, 45 % to Braemar and 10 % to Ashford Inc.

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

and Ashford Trust.

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

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

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

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

As of December 31, 2022, Braemar has funded approximately $ 5.6 million.

On February 1, 2023, Braemar entered into a Third Amended and Restated Contribution Agreement, which provided that after the Amended and Restated True-Up Date, capital contributions for the remainder of fiscal year 2023 would be divided between each Party based on the Initial True-Up Ratio, there would be a true up reflecting amounts raised by Ashford Securities since June 10, 2019, and thereafter, the capital contributions would be divided among each Party in accordance the cumulative ratio of capital raised by the Parties.

However, effective January 1, 2024, Braemar entered into a Fourth Amended and Restated Contribution Agreement with Ashford Inc.

and Ashford Trust which states that, notwithstanding anything in the prior contribution agreements:

(1) the Parties equally split responsibility for all aggregate contributions made by them to Ashford Securities through September 30, 2021 and (2) thereafter, their contributions for each quarter will be based on the ratio of the amounts raised by each Party through Ashford Securities the prior quarter compared to the total aggregate amount raised by the Parties through Ashford Securities the prior quarter.

To the extent contributions made by any of the Parties through December 31, 2023 differed from the amounts owed pursuant to the foregoing, the Parties shall make true up payments to each other to settle the difference.

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

This resulted in additional expense of approximately $ 7.2 million for the year ended December 31, 2022.

As of December 31, 2022, the payable amount that is included in “due to Ashford Inc., net” on the consolidated balance sheet is $ 6.6 million.

As of December 31, 2021, $ 338,000 of the pre-funded amount was included in “other assets” on the consolidated balance sheet.

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

In March 2023, Braemar paid Ashford Inc.

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

As of December 31, 2023, Braemar has funded approximately $ 20.9 million.

As of December 31, 2023, Braemar has a pre-funded balance of approximately $ 693,000 that is included in “other assets” and a receivable of approximately $ 3.5 million that is included in “due to Ashford Inc., net” on the consolidated balance sheet.

The table below summarizes the amount Braemar has expensed related to reimbursed operating expenses of Ashford Securities (in thousands):

2 unchanged sentences

Corporate, general and administrative $ 4,330 $ 9,461 $ 1,983

Enhanced Return Funding Program

Concurrent with Amendment No.

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

(“Amendment No.

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

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

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

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

or any of its subsidiaries.

The independent members of our board of directors and the independent members of the board of directors of Ashford Inc., with the assistance of separate and independent legal counsel, engaged to negotiate the ERFP Agreement on behalf of Braemar and Ashford Inc., respectively.

The ERFP Agreement generally provides that Ashford LLC will provide funding to facilitate the acquisition of properties by Braemar OP that are recommended by Ashford LLC, in an aggregate amount of up to $ 50 million (subject to increase to up to $ 100 million by mutual agreement).

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

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

At the end of the Initial Term, the ERFP Agreement automatically renewed for one year and shall automatically renew for successive one-year periods (each such period a “Renewal Term”) unless either Ashford Inc.

or Braemar provides written notice to the other at least 60 days in advance of the

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

expiration of the Initial Term or Renewal Term, as applicable, that such notifying party intends not to renew the ERFP Agreement.

On November 8, 2021, the Company received written notice from the Advisor of its intention not to renew the ERFP program.

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

Design and Construction Services

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

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

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

4 unchanged sentences

(iii) interior design ( 6 % of the purchase price of the FF&E designed or selected by Premier);

and (iv) FF&E purchasing ( 8 % of the purchase price of FF&E purchased by Premier;

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

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

Hotel Management Services

At December 31, 2022, Remington Hotels managed four of our 16 hotel properties.

We pay monthly hotel management fees equal to the greater of approximately $ 16,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues as well as annual incentive management fees, if certain operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

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

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

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

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

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

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

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

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

Ashford Trust

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

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

In January 2022, the City of San Francisco remitted payment to Ashford Trust, which subsequently remitted payment to Braemar.

During the second quarter of 2022 the Company received an additional payment of approximately $ 114,000 related to accrued interest on the initial settlement amount, which is included in “(gain) loss on legal settlements” on the consolidated statements of operations for the year ended December 31, 2022.

and (iv) FF&E

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

purchasing ( 8 % of the purchase price of FF&E purchased by Premier;

Subsequent to December 31, 2023, the agreement was amended resulting in such fees being payable monthly as the service is delivered based on percentage complete, as reasonably determined by Premier for each service, or payable as set forth in other agreements.

Hotel Management Services

At December 31, 2023, Remington Hospitality managed four of our 16 hotel properties.

We pay monthly hotel management fees equal to the greater of approximately $ 17,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues as well as annual incentive management fees, if certain operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

Summary of Transactions

4 unchanged sentences

Indebtedness, net (2)

Other Hotel Revenue Other Hotel Expenses Management fees Preferred Stock (3)

Property Taxes, Insurance and Other Advisory Services Fee Corporate General and Administrative

Other Assets (3)

Preferred Stock (4)

Other Hotel Revenue Other Hotel Expenses Management fees Property Taxes, Insurance and Other Advisory Services Fee Corporate General and Administrative Write-off of Premiums, Loan Costs and Exit Fees

Ashford LLC Insurance claims services $ 3 $ — $ — $ — $ — $ — $ — $ — $ 3 $ — $ — $ —

Ashford Securities Broker/Dealer 6,385 — — — 1,972 — — — — — 4,413 —

Ashford Securities Dealer Manager Fees 5,766 — — — — — 5,766 — — —

INSPIRE Audio visual services 4,165 — — — — 4,268 — — — — 103 —

Lismore Capital Debt placement and related services 2,426 — 987 150 — — — — — — — 1,289

Lismore Capital Broker Services 637 — 637 — — — — — — —

OpenKey Mobile key app 41 — — — — — 41 — — — — —

2 unchanged sentences

RED Leisure Watersports activities and travel/transportation services 427 — — — — 308 692 — — — 43 —

Remington Hotels Hotel management services (4)

Remington Hospitality Hotel management services (4)

3,913 — — — — — 1,394 2,519 — — — —

2 unchanged sentences

Indebtedness, net (2)

Other Assets Other Hotel Revenue Other Hotel Expenses Preferred Stock (3)

Management fees Property Taxes, Insurance and Other Advisory Services Fee Corporate General and Administrative Write-off of Premiums, Loan Costs and Exit Fees

Other Hotel Revenue Other Hotel Expenses Management fees Preferred Stock (4)

Property Taxes, Insurance and Other Advisory Services Fee Corporate General and Administrative

Ashford LLC Insurance claims services $ 3 $ — $ — $ — $ — $ — $ — $ 3 $ — $ —

8 unchanged sentences

RED Leisure Watersports activities and travel/transportation services 525 — — 236 761 — — — — —

Remington Hotels Hotel management services (4)

Remington Hospitality Hotel management services (4)

4,288 — — — 1,416 2,872 — — — —

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Year Ended December 31, 2021

Company Product or Service Total Investments in Hotel Properties, net (1)

Other Assets Other Hotel Revenue Other Hotel Expenses Management fees Property Taxes, Insurance and Other Advisory Services Fee Write-off of Premiums, Loan Costs and Exit Fees

Ashford LLC FF&E purchases $ 1,816 $ 1,816 $ — $ — $ — $ — $ — $ — $ —

Indebtedness, net (2)

Other Assets Other Hotel Revenue Other Hotel Expenses Preferred Stock (4)

Management fees Property Taxes, Insurance and Other Advisory Services Fee Corporate General and Administrative Write-off of Premiums, Loan Costs and Exit Fees

Ashford LLC Insurance claims services $ 7 $ — $ — $ — $ — $ — $ — $ — $ 7 $ — $ — $ —

Ashford Securities Broker/Dealer 1,983 — — — — — — — — — 1,983 —

Ashford Securities Dealer Manager Fees 410 — — — — — 410 — — — — —

INSPIRE Audio visual services 1,001 — — — 1,001 — — — — — — —

Lismore Capital Debt placement and related services 491 — 150 — — — — — — — — 341

Lismore Capital Broker services 3 — — — — — — — — — — 3

OpenKey Mobile key app 38 — — — — 38 — — — — — —

2 unchanged sentences

RED Leisure Watersports activities and travel/transportation services 321 — — — 321 — — — — — — —

Remington Hotels Hotel management services (4)

Remington Hospitality Hotel management services (4)

3,243 — — — — 934 — 2,309 — — — —

1 unchanged sentence

(2) Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.

(3) Represents the amortization of the Lismore work fees and success fees.

(4) Recorded as a reduction of Series E and Series M Redeemable Preferred Stock proceeds.

(5) Other hotel expenses include incentive hotel management fees and other hotel management costs.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the components of due to Ashford Inc.

(in thousands):

Due to Ashford Inc.

Due to (from) Ashford Inc.

Company Product or Service December 31, 2023 December 31, 2022

Ashford LLC Advisory services $ 1,004 $ 1,576

Ashford LLC FF&E purchases — —

Casualty Insurance

Ashford LLC Insurance claims services 1 2

1 unchanged sentence

OpenKey Mobile key app 5 —

Ashford securities Capital raise services 6,514 —

Ashford Securities

Contribution Agreement

Ashford Securities

Capital raise services 19 6,514

Premier Design and construction services 2,674 829

1 unchanged sentence

$ 1,471 $ 10,005

As of December 31, 2022 and 2021, due from related parties, net included a net receivable from Remington Hotels of $ 573,000 and $ 677,000 , respectively, primarily related to advances made by Braemar and accrued base and incentive management fees.

As of December 31, 2022 and December 31, 2021, due from related parties, net included a $ 365,000 security deposit paid to Remington Hotel Corporation, an entity indirectly owned by Mr.

Bennett and Mr.

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

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

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

As of December 31, 2023, due to related parties, net included a net payable to Remington Hospitality of $ 603,000 .

As of December 31, 2022, due from related parties, net included a net receivable of $ 573,000 .

These amounts are primarily related to advances made by Braemar, accrued base and incentive management fees and casualty insurance premiums.

Commitments and Contingencies

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In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 3 % to 5 % of gross revenues for capital improvements.

Licensing Fees —In conjunction with the Mr.

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

Licensing Fees —In conjunction with the Cameo Beverly Hills (formerly known as “Mr.

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

C brand name.

In return, we pay licensing fees of:

In return, we paid licensing fees of:

(i) 1 % of total operating revenue;

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

The agreement expires on August 5, 2023.

The agreement expired on August 5, 2023.

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

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Other hotel expenses $ 322 $ 467 $ 133

Management Fees —Under hotel management agreements for our hotel properties existing at December 31, 2022, we pay a monthly hotel management fee equal to the greater of approximately $ 16,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, or in some cases 3.0 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

Management Fees —Under hotel management agreements for our hotel properties existing at December 31, 2023, we pay a monthly hotel management fee equal to the greater of approximately $ 17,000 per hotel (increased annually based on

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

consumer price index adjustments) or 3 % of gross revenues, or in some cases 3.0 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

These management agreements expire from December 2027 through December 2065, with renewal options.

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Tax years 2019 through 2023 remain subject to potential examination by certain federal and state taxing authorities.

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

On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York County, seeking a declaratory judgment that no breach under the Accor management agreement has occurred and an injunction to prevent Ashford TRS Chicago II from terminating the Accor management agreement.

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

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

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

1) amend the Accor management agreement;

2) dismiss the lawsuit and counterclaims;

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

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

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

Arbitration occurred on October 12 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.

As a result of the settlement related to the 2018 performance test failure, the Company recorded a gain of approximately $ 868,000 in 2022, that is recorded as a reduction of management fees and included in “management fees” on the Company’s consolidated statement of operations.

On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company.

Litigation —On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company.

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

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

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

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

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

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

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

While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe any potential loss to the Company is reasonably estimable at this time.

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

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

After submission of the briefs, the court requested that the parties submit stipulations for the court to rule upon.

On February 13, 2024, the judge ordered the parties to submit additional briefing related to on-site breaks.

While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time.

As of December 31, 2023, no amounts have been accrued.

On June 8, 2022 a lawsuit was filed against various Hilton entities on behalf of a class of all hourly employees at all Hilton-branded managed properties in California, including Hilton La Jolla Torrey Pines.

The complaint includes claims for unpaid wages, meal and rest break violations, and unreimbursed business expenses, along with various derivative claims including wage statement, final pay, and PAGA claims.

On November 30, 2023, Hilton mediated this litigation, but it did not result in a settlement.

At the end of the mediation, the mediator submitted a mediator’s proposal for approximately $ 3.5 million, which the parties are still considering.

The allocation to Hilton La Jolla Torrey Pines would be approximately $ 371,000 , which has been accrued as of December 31, 2023.

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

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

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

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

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

1 unchanged sentence

Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations or cash flow.

However, our assessment may change depending upon the development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty.

If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.

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.

We believe that we maintain a sufficient level of insurance coverage related to such events, and the related incremental costs incurred to date are immaterial.

In February of 2024, two class action lawsuits were filed related to the cyber incident.

The suits are currently pending in the U.S.

District Court for the Northern District of Texas.

We intend to vigorously defend these matters and do not believe that any potential loss is reasonably estimable at this time.

It is reasonably possible that the Company may incur additional costs related to the matter, but we are unable to predict with certainty the ultimate amount or range of potential loss.

Our assessment may change depending upon the development of any current or future legal proceedings, and the final results of such legal proceedings cannot be predicted with certainty.

If we ultimately do not prevail in one or more of these legal

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.

Leases —We lease land under two non-cancelable operating ground leases, which expire in 2067 and 2065, related to our hotel properties in La Jolla, California and Yountville, California, respectively.

3 unchanged sentences

Capital Commitments —At December 31, 2023, we had capital commitments of $ 35.4 million, including commitments that will be satisfied with insurance proceeds, relating to general capital improvements that are expected to be paid in the next twelve months .

The majority of our leases are operating ground leases.

We also have operating equipment leases, such as copier and vehicle leases, at our hotel properties.

We have operating ground leases and operating equipment leases, such as copier and vehicle leases, at our hotel properties.

Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years.

2 unchanged sentences

We have no finance leases as of December 31, 2023.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The discount rate used to calculate the lease liability and ROU asset related to our ground leases is based on our incremental borrowing rate (“IBR”), as the rate implicit in each lease is not readily determinable.

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_______________________________________

(1) For the years ended December 31, 2022, 2021 and 2020, operating lease cost includes approximately $ 2.2 million, $ 954,000 and $( 305,000 ), respectively, of variable lease cost associated with the ground leases, with the credit in 2020 primarily caused by the ground lease percentage rent true-up for fiscal year 2019-2020 at Hilton La Jolla Torrey Pines.

(1) For the years ended December 31, 2023, 2022 and 2021, operating lease cost includes approximately $ 2.3 million, $ 2.2 million and $ 954,000 , respectively, of variable lease cost associated with the ground leases.

Additionally, we recorded $ 474,000 , $ 474,000 and $ 512,000 , respectively, of amortization costs related to the intangible assets that were reclassified to “operating lease right-of-use assets” upon adoption of ASC 842.

5 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases (in thousands) $ 3,307 $ 3,302 $ 3,261

Operating cash flows used for operating leases (in thousands)

$ 3,310 $ 3,307 $ 3,302

Weighted Average Remaining Lease Term

6 unchanged sentences

(1) Calculated using the lease term, excluding extension options, and discount rates of the ground leases.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Future minimum lease payments due under non-cancellable leases as of December 31, 2023 were as follows (in thousands):

6 unchanged sentences

(1) Based on payment amounts as of December 31, 2023 .

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

federal income tax purposes, we elected to be taxed as a REIT under the Code.

17 unchanged sentences

Benefits of Puerto Rico tax incentives 2,064 1,474 —

Effect of permanent differences

Other ( 46 ) 126 ( 251 )

1 unchanged sentence

Total income tax (expense) benefit $ ( 2,689 ) $ ( 4,043 ) $ ( 1,324 )

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The components of income tax expense are as follows (in thousands):

3 unchanged sentences

State ( 69 ) ( 247 ) ( 21 )

Foreign ( 824 ) — —

Total current income tax (expense) benefit ( 1,360 ) ( 3,992 ) ( 1,498 )

Federal ( 14 ) ( 51 ) 131

State — 43 ( 306 )

Foreign ( 1,315 ) — —

Total deferred income tax (expense) benefit ( 1,329 ) ( 51 ) 174

Total income tax (expense) benefit $ ( 2,689 ) $ ( 4,043 ) $ ( 1,324 )

For the years ended December 31, 2022, 2021 and 2020, income tax expense included interest and penalties paid to taxing authorities of $ 1,000 , $ 3,000 and $ 7,000 , respectively.

The following table presents the U.S.

and foreign earnings (losses) from continuing operations before income taxes (in thousands):

Year Ended December 31,

2023 2022 2021

$ ( 51,878 ) $ ( 3,859 ) $ ( 47,986 )

23,939 27,250 16,399

$ ( 27,939 ) $ 23,391 $ ( 31,587 )

For the years ended December 31, 2023, 2022 and 2021, income tax expense included interest and penalties paid to/(received from) taxing authorities of $( 11,000 ), $ 1,000 and $ 3,000 , respectively.

At December 31, 2023 and 2022, we determined that there were no amounts to accrue for interest and penalties due to taxing authorities.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2022 and 2021, our net deferred tax asset, included in “other assets,” on our consolidated balance sheets, consisted of the following (in thousands):

Deferred tax assets (liabilities):

At December 31, 2023 and 2022, our deferred tax asset (liability) and related valuation allowance consisted of the following (in thousands):

Deferred tax assets:

Tax intangibles basis greater than book basis $ 722 $ 722

3 unchanged sentences

Capital loss carryforward 511 525

Other ( 48 ) 178

Accrued expenses 761 1,133

Tax property basis greater than book basis ( 2,935 ) ( 2,487 )

Prepaid expenses ( 59 ) ( 4 )

Net deferred tax asset 18,635 17,402

Total deferred tax asset

20,786 21,681

Valuation allowance ( 16,169 ) ( 18,627 )

Net deferred tax asset

$ 4,617 $ 3,054

Deferred tax liabilities:

$ ( 6 ) $ ( 52 )

Tax property basis greater/(less) than book basis

( 5,932 ) ( 2,935 )

Prepaid expenses — ( 59 )

Total deferred tax liability

( 5,938 ) ( 3,046 )

Net deferred tax asset (liability) $ ( 1,321 ) $ 8

At December 31, 2022 and 2021, we recorded a valuation allowanc e of $ 18.6 million and $ 17.3 million, res pectively, to partially reserve the deferred tax assets of our TRSs.

Primarily as a result of the limitation imposed by the Code on the utilization of net operating losses of acquired subsidiaries, we believe it is more likely than not that $ 18.6 million of our deferred tax assets will not be realized, and therefore, have provided a valuation allowance to reserve against the balances.

At December 31, 2022, we had TRSs net operating loss carryforwards for U.S.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2023 and 2022, we have reserved certain deferred tax assets of our TRS entities and recorded a valuation allowanc e of $ 16.2 million and $ 18.6 million, respectively .

Primarily as a result of the limitation imposed by the Code on the utilization of net operating losses of acquired subsidiaries, we believe it is more likely than not that a portion of our deferred tax assets will not be realized, and therefore, have provided a valuation allowance to reserve against the balances.

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

federal income tax purposes of $ 63.6 million, of which $ 47.3 million is subject to expiration and will begin to expire in 2024.

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The tax holiday is conditional upon our meeting certain employment and investment thresholds.

The impact of this tax holiday decreased current foreign taxes by $ 3.4 million, $ 907,000 and $ 0 for the years ended December 31, 2022, 2021 and 2020, respectively.

The impact of this tax holiday decreased current foreign taxes by $ 2.7 million, $ 3.4 million and $ 907,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

The benefit of the tax holiday on net income (loss) per share was approximately, $ 0.04 , $ 0.05 and $ 0.02 for the years ended December 31, 2023, 2022 and 2021, respectively.

2 unchanged sentences

The tax holiday is conditional upon meeting certain employment and investment thresholds.

The impact of this tax holiday decreased current foreign taxes by $ 2.5 million for the year ended December 31, 2022.

The benefit of this tax holiday on net income (loss) per share was approximately $ 0.04 for the year ended December 31, 2022.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law and includes certain income tax provisions relevant to businesses.

The Company is required to recognize the effect on the consolidated financial statements in the period the law was enacted.

For the year ended December 31, 2020, the CARES Act allowed us to record a tax benefit of $ 3.4 million for the 2020 net operating loss at our TRS that was carried back to prior tax years.

The impact of this tax holiday decreased current foreign taxes by $ 4.0 million and $ 2.5 million for the years ended December 31, 2023 and 2022, respectively.

The benefit of this tax holiday on net income (loss) per share was approximately $ 0.06 and $ 0.04 for the years ended December 31, 2023 and 2022, respectively.

Intangible Assets, net

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The customer relationships are being amortized over the 15 year expected life.

For the years ended December 31, 2022, 2021 and 2020, amortization related to intangible assets was $ 378,000 , $ 379,000 and $ 379,000 , respectively.

For the years ended December 31, 2023, 2022 and 2021, amortization expense related to intangible assets was $ 379,000 , $ 378,000 and $ 379,000 , respectively.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Estimated future amortization expense for intangible assets, net for each of the next five years and thereafter is as follows (in thousands):

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For the year ended December 31, 2023, The Ritz-Carlton St.

Thomas and the Ritz-Carlton Sarasota generated revenues in excess of 10% of total hotel revenue amounting to 28 % of total hotel revenue.

Thomas, The Ritz-Carlton Sarasota and The Ritz-Carlton Reserve Dorado Beach generated revenues in excess of 10% of total hotel revenue amounting to 33 % of total hotel revenue.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents.

9 unchanged sentences

Subsequent Events

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Subsequent to December 31, 2022, the Company issued approximately 3.8 million shares of Series E Preferred Stock and received net proceeds of approximately $ 85.4 million and issued approximately 533,000 shares of Series M Preferred Stock and received net proceeds of approximately $ 12.9 million.

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

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

The Company has repurchased approximately 5.4 million shares of its common stock for approximately $ 25.0 million and has completed the $ 25.0 million repurchase authorization authorized by the board of directors on December 7, 2022.

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.

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.

The Company paid approximately $ 692,000 upon extension.

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

On February 27, 2024, the Company approved funding, together with Ashford Inc., up to $ 1.0 million in aggregate to OpenKey, allocated pro rata among them.

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 %.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data