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Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-08 · 176 added, 443 removed, 365 unchanged (63% of the section changed)

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• the factors discussed in our Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2024 (the “2023 10-K”), including those set forth under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties;” and other filings under the Exchange Act;

• rising interest rates and inflation;

• changes in interest rates and inflation;

• macroeconomic conditions, such as a prolonged period of weak economic growth, and volatility in capital markets;

• uncertainty in the business sector and market volatility due to the 2023 failures of Silicon Valley Bank, New York Signature Bank and First Republic Bank;

• extreme weather conditions may cause property damage or interrupt business;

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

• extreme weather conditions, which may cause property damage or interrupt business;

• our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our liquidity requirements;

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• availability, terms and deployment of capital;

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

• risks associated with our ability to effectuate our dividend policy, including factors such as operating results and the economic outlook influencing our board’s decision whether to pay further dividends at levels previously disclosed or to use available cash to pay dividends;

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

• changes in our industry and the markets in which we operate, interest rates, or local economic conditions;

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

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

and its subsidiaries (including Ashford LLC, Remington Hospitality and Premier), Stirling Hotels & Resorts, Inc.

(“Stirling Inc.”), and our executive officers and our non-independent directors;

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

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federal income tax purposes;

• future sales and issuances of our common stock or other securities might result in dilution and could cause the price of our common stock to decline.

• future sales and issuances of our common stock or other securities, which might result in dilution and could cause the price of our common stock to decline.

When considering forward-looking statements, you should keep in mind the matters summarized under “Item 1A.

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

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

As of March 31, 2024, we owned interests in 16 hotel properties in seven states, the District of Columbia, Puerto Rico and St.

Virgin Islands with 4,201 total rooms, or 3,963 net rooms, excluding those attributable to our joint venture partner.

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

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

We are advised by Ashford LLC through an advisory agreement.

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

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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.

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

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

As of March 31, 2024, Remington Hospitality , a subsidiary of Ashford Inc., managed four of our 16 hotel properties.

Third-party management companies managed the remaining hotel properties.

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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.

Bennett is chairman and chief executive officer of Ashford Inc.

and brokerage services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and mobile key technology.

Bennett, chairman and chief executive officer of Ashford Inc.

and, together with Mr.

Archie Bennett, Jr., as of September 30, 2023, hold a controlling interest in Ashford Inc.

Archie Bennett, Jr., as of March 31, 2024, hold a controlling interest in Ashford Inc.

The Bennetts owned approximately 610,261 shares of Ashford Inc.

common stock, which represented an approximate 17.8% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc.

Series D Convertible Preferred Stock, which, along with all unpaid accrued and accumulated dividends thereon, was convertible (at a conversion price of $117.50 per share) into an additional approximate 4,154,013 shares

of Ashford Inc.

common stock, which if converted as of September 30, 2023 would have increased the Bennetts’ ownership interest in Ashford Inc.

common stock, which if converted as of March 31, 2024 would have increased the Bennetts’ ownership interest in Ashford Inc.

The 18,758,600 shares of Series D Convertible Preferred Stock owned by Mr.

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include 360,000 shares owned by trusts.

As of September 30, 2023, Mr.

As of March 31, 2024, Mr.

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

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Recent Developments

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

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

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

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

Bank of America, N.A.

acted as administrative agent and lead arranger on the transaction.

Syndicate bank participants include TBK Bank and MidFirst Bank.

The Credit Agreement evidences a $200 million 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 a size of not more than $400 million in the aggregate.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

On September 29, 2023, the Company amended the mortgage loan secured by the Four Seasons Resort Scottsdale.

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

On October 31, 2023, the Company amended its $54.0 million mortgage loan secured by The Ritz-Carlton Lake Tahoe.

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

On 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 extension.

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

In February 2024, the Company and Ashford Inc.

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

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

and the Company.

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

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

On March 10, 2024, Blackwells Capital LLC and certain of its affiliates (collectively, “Blackwells”) submitted materials to the Company purporting to provide notice (the “Purported Nominating Notice”) of Blackwells’ intent to nominate four individuals for election to our board of directors and submit non-binding business proposals for stockholder consideration at the Company’s 2024 annual meeting of stockholders (the “Annual Meeting”).

After reviewing the Purported Nominating Notice, the board of directors determined that the Purported Nominating Notice failed to comply with the advance notice provisions under the Company's Bylaws (including among other reasons Blackwells’ failure to disclose its continued interest in acquiring the Company) and, as a result, determined Blackwells’ nominations to be invalid.

On March 22, 2024, Blackwells filed a preliminary proxy statement with the SEC to solicit proxies in support of its purported nominees and business proposals set forth in the Purported Nominating Notice.

On March 24, 2024, the Company brought suit against Blackwells in the United States District Court for the Northern District of Texas, seeking injunctive relief against the solicitation of proxies by Blackwells and a declaratory judgment that Blackwells’ nomination is invalid and, as a result, that Blackwells’ slate of purported nominees is invalid and ineligible to stand for election by the Company’s stockholders.

On April 3, 2024, Blackwells filed its definitive proxy statement with the SEC.

In April 2024, the Company repaid the $30.0 million mortgage loan secured by the Cameo Beverly Hills hotel.

On May 3, 2024, the board of directors reflecting its commitment to creating long-term value to shareholders, approved notable capital market activities and strategic updates, including:

-The sale of Hilton Torrey Pines for $165 million, and evaluating the sale of two other hotels

-The repayment of all of its 2024 debt maturities

-A $50 million preferred share redemption program

-A $50 million common share repurchase authorization

On May 3, 2024, our board of directors approved a new share repurchase program, pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share, having an aggregate value of up to $50 million.

The Company intends to begin share repurchases as soon as practicable and may repurchase shares through open market transactions, privately negotiated transactions or other means.

The timing and amount of any transactions will be subject to the discretion of the Company based upon market conditions, and the program may be suspended or terminated at any time by the Company at its discretion without prior notice.

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

On May 6, 2024, CHH Torrey Pines Hotel Partners, LP and CHH Torrey Pines Tenant Corp.

(together “Seller”), indirect subsidiaries of the Company, entered into an Agreement of Purchase and Sale with JRK Torrey Pines Hotel Owner LLC, for the sale of the Hilton La Jolla Torrey Pines hotel for $165 million in cash, subject to customary pro-rations and adjustments.

The Company owns an indirect 75% equity interest in Seller.

The sale of the hotel is expected to close in the second quarter of 2024, subject to customary closing conditions.

Key Indicators of Operating Performance

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RESULTS OF OPERATIONS

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

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

Three Months Ended September 30, Favorable (Unfavorable)

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 (in thousands except percentages):

Three Months Ended March 31, Favorable (Unfavorable)

2024 2023 $ Change % Change

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Other 26,980 25,546 1,434 5.6

Total revenue 159,801 161,189 (1,388) (0.9)

Total hotel revenue 219,079 215,301 3,778 1.8

Hotel operating expenses:

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Interest income 796 2,108 (1,312) (62.2)

Other income (expense) 293 27 266 985.2

Interest expense and amortization of loan costs (23,306) (14,490) (8,816) (60.8)

Interest expense and amortization of discounts and loan costs (26,491) (22,873) (3,618) (15.8)

Write-off of loan costs and exit fees (721) (12) (709) (5,908.3)

Gain (loss) on extinguishment of debt — 2,318 (2,318) (100.0)

Realized and unrealized gain (loss) on derivatives 932 (334) 1,266 379.0

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Net income (loss) attributable to the Company $ 15,929 $ 16,034 $ (105) (0.7) %

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

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

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

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

Hotel Property Location Type Date

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

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

Three Months Ended September 30,

Occupancy 68.37 % 71.50 %

ADR (average daily rate) $ 379.97 $ 398.16

RevPAR (revenue per available room) $ 259.78 $ 284.69

Rooms revenue (in thousands) $ 100,738 $ 104,503

Total hotel revenue (in thousands) $ 159,801 $ 161,189

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

Three Months Ended September 30,

The following table illustrates the key performance indicators of our 16 hotel properties owned for the periods indicated:

Three Months Ended March 31,

Occupancy 65.39 % 64.85 %

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Total hotel revenue (in thousands) $ 219,079 $ 215,301

Net Income (Loss) Attributable to the Company.

Net loss attributable to the Company increased $14.0 million, from $8.0 million for the three months ended September 30, 2022 (the “2022 quarter”) to $22.0 million for the three months ended September 30, 2023 (the “2023 quarter”), as a result of the factors discussed below.

Net Income Attributable to the Company.

Net income attributable to the Company decreased $105,000 from $16.0 million for the three months ended March 31, 2023 (the “2023 quarter”) to $15.9 million for the three months ended March 31, 2024 (the “2024 quarter”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue decreased $3.8 million, or 3.6%, to $100.7 million during the 2023 quarter compared to the 2022 quarter.

During the 2023 quarter, we experienced a 313 basis point decrease in occupancy and a 4.6% decrease in room rates.

Rooms revenue increased $1.0 million, or 0.7%, to $138.6 million during the 2024 quarter compared to the 2023 quarter.

During the 2024 quarter, we experienced a 54 basis point increase in occupancy and room rates decreased 1.4% compared to the 2023 quarter.

Fluctuations in rooms revenue between the 2024 quarter and the 2023 quarter are a result of the changes in occupancy and ADR between the 2024 quarter and the 2023 quarter as reflected in the table below (dollars in thousands):

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Rooms Revenue Occupancy

(change in bps) ADR (change in %)

(change in bps) ADR

(change in %)

Capital Hilton (1) (2)

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Marriott Seattle Waterfront

2,215 1,402 2.9 %

The Notary Hotel (23) 170 (4.8) %

The Clancy (1,005) (413) (5.7) %

612 538 (2.1) %

Sofitel Chicago Magnificent Mile (192) (210) (2.7) %

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Bardessono Hotel and Spa (1)

(623) (723) (11.0) %

The Ritz-Carlton Lake Tahoe

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The Ritz-Carlton Reserve Dorado Beach 3,565 921 4.6 %

Four Seasons Resort Scottsdale (42) 1,122 (18.5) %

Total $ 1,025 $ 54 (1.4) %

Non-comparable

Four Seasons Resort Scottsdale $ 3,541 n/a n/a

(1) This hotel was under renovation during the 2024 quarter.

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Food and Beverage Revenue .

Food and beverage revenue increased $913,000, or 2.4%, to $38.5 million during the 2023 quarter compared to the 2022 quarter.

This increase is attributable to an aggregate increase of $1.3 million at six comparable hotel properties and an increase of $3.0 million from the acquisition of the Four Seasons Resort Scottsdale on December 1, 2022.

These increases were partially offset by an aggregate decrease of $3.3 million at The Clancy, Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, The Ritz-Carlton St.

Thomas, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, Cameo Beverly Hills and The Ritz-Carlton Reserve Dorado Beach.

Food and beverage revenue increased $1.3 million, or 2.5%, to $53.5 million during the 2024 quarter compared to the 2023 quarter.

We experienced an aggregate increase in food and beverage revenue of $3.2 million at nine hotel properties.

These increases were partially offset by an aggregate decrease of approximately $1.9 million at Capital Hilton, Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton Lake Tahoe, Bardessono Hotel and Spa, and Cameo Beverly Hills.

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $1.4 million, or 5.6%, to $27.0 million during the 2024 quarter compared to the 2023 quarter.

This increase is attributable to an aggregate increase in other hotel revenue of $1.2 million at nine comparable hotel properties and an increase of $1.7 million at the Four Seasons Resort Scottsdale, partially offset by an aggregate decrease of $1.4 million at the Capital Hilton, The Notary Hotel, Pier House Resort & Spa, The Ritz-Carlton St.

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

This increase is attributable to higher other hotel revenue of $2.1 million at 12 hotel properties.

These increases were partially offset by an aggregate decrease of approximately $713,000 at Bardessono Hotel and Spa, Hilton La Jolla Torrey Pines, Four Seasons Resort Scottsdale, and The Ritz-Carlton Lake Tahoe.

Rooms Expense .

Rooms expense increased $906,000, or 3.3%, to $28.3 million in the 2024 quarter compared to the 2023 quarter.

This increase is primarily attributable to an aggregate increase of $723,000 at five comparable hotel properties and an increase of $1.5 million at the Four Seasons Resort Scottsdale, partially offset by an aggregate decrease of $1.7 million at The Clancy, Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, The Ritz-Carlton St.

Thomas, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, The Ritz-Carlton Lake Tahoe, Cameo Beverly Hills and The Ritz-Carlton Reserve Dorado Beach.

This increase is attributable to an aggregate increase in rooms expense of $1.3 million at 11 hotel properties.

These increases were partially offset by an aggregate decrease of approximately $349,000 at The Ritz-Carlton St.

Thomas, Bardessono Hotel and Spa, Hotel Yountville, Cameo Beverly Hills, and Park Hyatt Beaver Creek Resort & Spa.

Food and Beverage Expense .

Food and beverage expense increased $1.4 million, or 4.6%, to $32.8 million during the 2023 quarter compared to the 2022 quarter.

This increase is attributable to an aggregate increase of $716,000 at seven comparable hotel properties and an increase of $3.1 million at the Four Seasons Resort Scottsdale, partially offset by an aggregate decrease of $2.4 million at the Sofitel Chicago Magnificent Mile, The Ritz-Carlton St.

Thomas, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton Sarasota, Hilton La Jolla Torrey Pines, The Ritz-Carlton Lake Tahoe, Cameo Beverly Hills and The Ritz-Carlton Reserve Dorado Beach.

Food and beverage expense increased $978,000, or 2.5%, to $40.7 million during the 2024 quarter compared to the 2023 quarter.

This increase is attributable to higher food and beverage expense of $1.8 million at 12 hotel properties.

These increases were partially offset by an aggregate decrease of approximately $855,000 at Capital Hilton, Park Hyatt Beaver Creek Resort & Spa, Bardessono Hotel and Spa and Cameo Beverly Hills.

Other Operating Expenses .

Other operating expenses increased $1.9 million, or 3.7%, to $52.7 million in the 2023 quarter compared to the 2022 quarter.

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

We experienced an increase of $245,000 in direct expenses and $1.6 million in indirect expenses and incentive management fees in the 2023 quarter as compared to the 2022 quarter.

Other operating expenses decreased $2.2 million, or 3.6%, to $60.1 million in the 2024 quarter compared to the 2023 quarter.

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

We experienced an increase of $738,000 in direct expenses and a decrease of $3.0 million in indirect expenses and incentive management fees in the 2024 quarter compared to the 2023 quarter.

Direct expenses were 4.5% of total hotel revenue in the 2024 quarter and 4.2% in the 2023 quarter.

The increase in direct expenses includes an increase of approximately $548,000 at the Four Seasons Resort Scottsdale.

The increase in indirect expenses comprises increases in:

(i) general and administrative costs of $719,000 comprising an increase $1.3 million at the one acquired hotel property offset by a decrease of $620,000 at our 15 comparable hotel properties;

(ii) marketing costs of $1.1 million comprising an increase of $218,000 at our 15 comparable hotel properties and $912,000 at the one acquired hotel property;

(iii) repairs and maintenance of $773,000, comprising an increase of $53,000 at our 15 comparable hotel properties and $720,000 at one acquired hotel property;

and (iv) energy costs of $196,000 comprising an increase of $89,000 at our 15 comparable hotel properties and $285,000 at the one acquired hotel property.

The increases were partially offset by decreases in (i) incentive management fees of $1.2 million comprising an aggregate decrease of $1.1 million from our 15 comparable hotel properties and $59,000 at the one acquired hotel property, and (ii) lease expense of $66,000 at our 15 comparable hotel properties.

The increase in direct expenses is associated with higher direct expenses of approximately $779,000 at 12 hotel properties.

These increases were partially offset by lower direct expenses of $41,000 at the Capital Hilton, Bardessono Hotel and Spa, Cameo Beverly Hills, and The Notary Hotel.

The decrease in indirect expenses was attributable to lower:

(i) incentive management fees of $1.9 million;

(ii) general and administrative costs of $1.7 million;

(iii) lease expense of $277,000;

and (iv) energy costs of $225,000, partially offset by higher:

(i) repairs and maintenance of $642,000;

and (ii) $467,000 in marketing costs.

Management Fees .

Base management fees decreased $40,000, or 0.8%, to $5.1 million in the 2023 quarter compared to the 2022 quarter.

Base management fees decreased by $473,000 at 12 comparable hotel properties, partially offset by an aggregate increase of $173,000 at the Capital Hilton, The Notary Hotel and Marriott Seattle Waterfront and an increase of $260,000 at the one acquired hotel property.

Base management fees increased $271,000, or 4.0%, to $7.0 million in the 2024 quarter compared to the 2023 quarter.

Management fees increased $432,000 at eight hotel properties.

These increases were partially offset by an aggregate decrease of $161,000 at the Park Hyatt Beaver Creek Resort & Spa, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa, Cameo Beverly Hills, Sofitel Chicago Magnificent Mile, Hilton La Jolla Torrey Pines, and The Ritz-Carlton Lake Tahoe.

Property Taxes, Insurance and Other .

Property taxes, insurance and other increased $2.6 million, or 31.7%, to $10.7 million in the 2024 quarter compared to the 2023 quarter.

The increase is primarily attributable to an aggregate increase of approximately $2.2 million at 13 comparable hotel properties and $211,000 at the one acquired hotel property.

These increases were partially offset by an aggregate decrease of $830,000, including $813,000 at the Sofitel Chicago Magnificent Mile and $17,000 at The Notary Hotel.

Depreciation and Amortization .

Depreciation and amortization increased $3.1 million, or 15.8%, to $22.7 million in the 2023 quarter compared to the 2022 quarter.

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

These increases were partially offset by an aggregate decrease of $961,000 at the Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa and Cameo Beverly Hills due to fully depreciated assets.

Advisory Services Fee.

Advisory services fee decreased $1.8 million, or 20.7%, to $7.0 million in the 2023 quarter compared to the 2022 quarter due to decreases of $1.0 million in the incentive fee and $1.7 million in equity-based compensation, partially offset by increases in the base advisory fee of $124,000 and reimbursable expenses of $837,000.

In the 2023 quarter, we recorded an advisory services fee of $7.0 million, which included a base advisory fee of $3.4 million, reimbursable expenses of $2.0 million, $1.6 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

In the 2022 quarter, we recorded an advisory services fee of $8.9 million, which included a base advisory fee of $3.3 million, reimbursable expenses of $1.2 million, $3.3 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

and an incentive fee of $1.0 million.

Corporate General and Administrative .

Corporate general and administrative expense was $2.5 million in the 2023 quarter as compared to $8.1 million in the 2022 quarter.

The decrease in corporate general and administrative expense is due to lower reimbursed operating expenses of Ashford Securities of $4.6 million, lower professional fees of $519,000, lower miscellaneous expenses of $372,000 and lower public company costs of $80,000.

During the third quarter of 2022, the funding estimate to Ashford Securities was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities that resulted in additional expense of approximately $5.2 million.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2023 quarter and 2022 quarter, we recorded equity in loss of unconsolidated entity of $60,000 and $74,000, respectively, related to our investment in OpenKey.

Interest Income .

Interest income was $986,000 and $745,000 in the 2023 quarter and 2022 quarter, respectively.

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

Other Income (Expense) .

Other income was $293,000 in the 2023 quarter compared to $27,000 in the 2022 quarter.

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

Interest Expense and Amortization of Loan Costs .

Interest expense and amortization of loan costs increased $8.8 million, or 60.8%, to $23.3 million in the 2023 quarter compared to the 2022 quarter.

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

The average LIBOR rate for the 2022 quarter was 2.47%.

The average SOFR rates for the 2023 quarter and the 2022 quarter were 5.08% and 2.08%, respectively.

Write-off of Loan Costs and Exit Fees.

Write-off of loan costs and exit fees was $2.6 million in the 2023 quarter, primarily related to various loan modifications and costs associated with the $200 million secured credit facility.

Write-off of loan costs and exit fees was $8,000 in the 2022 quarter, primarily related to the mortgage loan extension of The Ritz-Carlton St.

Realized and Unrealized Gain (Loss) on Derivatives .

Realized and unrealized gain on derivatives of $223,000 for 2023 quarter consisted of an unrealized gain on warrants of approximately $154,000 and a realized gain of $2.0 million associated with payments received from counterparties on in-the-money interest rate caps.

These gains were partially offset by an unrealized loss on interest rate caps of approximately $1.9 million.

Unrealized gain on derivatives of $2.4 million in the 2022 quarter consisted of an unrealized gain of approximately $265,000 on warrants and approximately $2.1 million on interest rate caps.

Income Tax (Expense) Benefit .

Income tax (expense) benefit changed $1.3 million, from expense of $95,000 in the 2022 quarter to a benefit of $1.2 million in the 2023 quarter.

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

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

Our noncontrolling interest partner in consolidated entities was allocated income of $1.8 million and $823,000 in the 2023 quarter and the 2022 quarter, respectively.

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

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

Noncontrolling interests in operating partnership were allocated a net loss of $2.4 million and $1.2 million in the 2023 quarter and the 2022 quarter, respectively.

Redeemable noncontrolling interests in Braemar OP represented ownership interests of 6.63% and 7.66% as of September 30, 2023 and 2022, respectively.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

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

Nine Months Ended September 30, Favorable (Unfavorable)

2023 2022 $ Change % Change

Rooms $ 355,402 $ 322,222 $ 33,180 10.3 %

Food and beverage 138,541 116,600 21,941 18.8

Other 67,866 59,141 8,725 14.8

Total hotel revenue 561,809 497,963 63,846 12.8

Hotel operating expenses:

Rooms 79,962 69,742 (10,220) (14.7)

Food and beverage 108,854 91,242 (17,612) (19.3)

Other expenses 171,317 149,130 (22,187) (14.9)

Management fees 17,661 14,802 (2,859) (19.3)

Total hotel operating expenses 377,794 324,916 (52,878) (16.3)

Property taxes, insurance and other 27,983 22,731 (5,252) (23.1)

Depreciation and amortization 67,791 57,616 (10,175) (17.7)

Advisory services fee 23,183 22,481 (702) (3.1)

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

Corporate general and administrative 9,222 14,008 4,786 34.2

Total expenses 505,973 441,638 (64,335) (14.6)

Operating income (loss) 55,836 56,325 (489) (0.9)

Equity in earnings (loss) of unconsolidated entity (208) (220) 12 5.5

Interest income 5,389 932 4,457 478.2

Other income (expense) 293 27 266 985.2

Interest expense and amortization of discounts and loan costs (69,779) (33,293) (36,486) (109.6)

Write-off of loan costs and exit fees (2,848) (106) (2,742) (2,586.8)

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

Realized and unrealized gain (loss) on derivatives 918 4,019 (3,101) (77.2)

Income (loss) before income taxes (8,081) 27,684 (35,765) (129.2)

Income tax (expense) benefit (1,064) (3,783) 2,719 71.9

Net income (loss) (9,145) 23,901 (33,046) (138.3)

(Income) loss attributable to noncontrolling interest in consolidated entities (1,715) (2,265) 550 24.3

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership 3,018 (647) 3,665 566.5

Net income (loss) attributable to the Company $ (7,842) $ 20,989 $ (28,831) (137.4) %

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

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

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

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

Hotel Property Location Type Date

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

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

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

Nine Months Ended September 30,

Occupancy 68.06 % 66.00 %

ADR (average daily rate) $ 453.87 $ 451.01

RevPAR (revenue per available room) $ 308.88 $ 297.66

Rooms revenue (in thousands) $ 355,402 $ 322,222

Total hotel revenue (in thousands) $ 561,809 $ 497,963

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

Nine Months Ended September 30,

Occupancy 69.50 % 63.49 %

ADR (average daily rate) $ 396.14 $ 423.14

RevPAR (revenue per available room) $ 275.31 $ 279.61

Rooms revenue (in thousands) $ 293,020 $ 296,628

Total hotel revenue (in thousands) $ 456,078 $ 456,619

Net Income (Loss) Attributable to the Company.

Net income (loss) attributable to the Company changed $28.8 million, from net income of $21.0 million for the nine months ended September 30, 2022 (the “2022 period”), to a net loss of $7.8 million for the nine months ended September 30, 2023 (the “2023 period”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue increased $33.2 million, or 10.3%, to $355.4 million during the 2023 period compared to the 2022 period.

During the 2023 period, we experienced a 206 basis point increase in occupancy and a 0.6% increase in room rates compared to the 2022 period.

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

Hotel Property Favorable (Unfavorable)

Rooms Revenue Occupancy

(change in bps) ADR

(change in %)

Capital Hilton (1)

$ 7,130 1,320 10.2 %

Marriott Seattle Waterfront (2)

6,454 1,752 3.7 %

The Notary Hotel 3,279 767 6.3 %

Sofitel Chicago Magnificent Mile 573 422 (3.2) %

Pier House Resort & Spa (3,273) (443) (10.0) %

The Ritz-Carlton St.

Thomas (7,383) (841) (6.3) %

Park Hyatt Beaver Creek Resort & Spa 976 (652) 15.7 %

Hotel Yountville (1,535) 767 (24.9) %

The Ritz-Carlton Sarasota (1)

(7,634) (1,374) (4.1) %

Hilton La Jolla Torrey Pines 539 92 1.3 %

Bardessono Hotel and Spa (1,981) 250 (16.7) %

The Ritz-Carlton Lake Tahoe (1)

(730) (77) (2.6) %

Cameo Beverly Hills

(994) (13) (9.6) %

Total $ (3,608) 601 (6.4) %

Non-comparable

The Ritz-Carlton Reserve Dorado Beach $ 11,166 n/a n/a

Four Seasons Resort Scottsdale 25,622 n/a n/a

Total $ 36,788

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

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

Food and Beverage Revenue .

Food and beverage revenue increased $21.9 million, or 18.8%, to $138.5 million during the 2023 period compared to the 2022 period.

We experienced an aggregate increase in food and beverage revenue of $9.0 million at five comparable hotel properties and increases of $4.0 million and $14.8 million at The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale, respectively.

These increases were partially offset by an aggregate decrease of approximately $5.8 million at The Ritz-Carlton St.

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

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $8.7 million, or 14.8%, to $67.9 million during the 2023 period compared to the 2022 period.

This increase is attributable to higher other hotel revenue of $2.7 million at nine comparable hotel properties, $2.5 million at The Ritz-Carlton Reserve Dorado Beach and $6.4 million at the Four Seasons Resort Scottsdale.

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

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

Rooms Expense .

Rooms expense increased $10.2 million, or 14.7%, to $80.0 million in the 2023 period compared to the 2022 period.

This increase is attributable to an aggregate increase in rooms expense of $4.9 million at eight comparable hotel properties, an increase of $1.5 million at The Ritz-Carlton Reserve Dorado Beach and an increase of $5.7 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $1.8 million at The Ritz-Carlton St.

Thomas, The Ritz-Carlton Sarasota, Pier House Resort & Spa, Bardessono Hotel and Spa, Hotel Yountville and Hilton La Jolla Torrey Pines.

Food and Beverage Expense .

Food and beverage expense increased $17.6 million, or 19.3%, to $108.9 million during the 2023 period compared to the 2022 period.

This increase is attributable to higher food and beverage expense of $5.5 million at six comparable hotel properties, $3.6 million at The Ritz-Carlton Reserve Dorado Beach and $11.5 million at the Four Seasons Resort Scottsdale.

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

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

Other Operating Expenses .

Other operating expenses increased $22.2 million, or 14.9%, to $171.3 million in the 2023 period compared to the 2022 period.

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

We experienced an increase of $3.1 million in direct expenses and $19.0 million in indirect expenses and incentive management fees in the 2023 period compared to the 2022 period.

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

The increase in direct expenses is associated with higher direct expenses of approximately $1.2 million at nine comparable hotel properties, $1.3 million at The Ritz-Carlton Reserve Dorado Beach and $2.0 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by lower direct expenses of $1.4 million at the Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, Cameo Beverly Hills, The Ritz-Carlton St.

Thomas and The Ritz-Carlton Sarasota.

The increase in indirect expenses is attributable to increases in:

(i) general and administrative costs of $7.6 million comprising an increase of $1.5 million at our 14 comparable hotel properties and $6.1 million at the two acquired hotel properties;

(ii) marketing costs of $7.7 million comprising an increase of $3.4 million at our 14 comparable hotel properties and $4.4 million at the two acquired hotel properties;

(iii) repairs and maintenance of $3.4 million comprising an increase of $470,000 at our 14 comparable hotel properties and $2.9 million at the two acquired hotel properties;

(iv) lease expense of $92,000 comprising an increase of $130,000 at our 14 comparable hotel properties, partially offset by an aggregate decrease of $38,000 at the two acquired hotel properties;

and (v) energy costs of $2.5 million comprised of an increase of $1.1 million at our 14 comparable hotel properties and $1.4 million at our two acquired hotel properties.

These increases in indirect expenses were partially offset by an aggregate decrease of $2.3 million in incentive management fees, comprising of an aggregate decrease of $3.8 million at our 14 comparable hotel properties, offset by an aggregate increase of $1.5 million at the two acquired hotel properties.

Management Fees .

Base management fees increased $2.9 million, or 19.3%, to $17.7 million in the 2023 period compared to the 2022 period.

Management fees increased $2.0 million at six comparable hotel properties, $535,000 at The Ritz-Carlton Reserve Dorado Beach and $1.4 million at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of $1.0 million at the Park Hyatt Beaver Creek Resort & Spa, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa, Cameo Beverly Hills, The Ritz-Carlton St.

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

Property Taxes, Insurance and Other .

Property taxes, insurance and other increased $5.3 million, or 23.1%, to $28.0 million in the 2023 period compared to the 2022 period.

This increase is primarily attributable to an aggregate increase of $4.4 million at 12 comparable hotel properties, $929,000 at The Ritz-Carlton Reserve Dorado Beach and $718,000 at the Four Seasons Resort Scottsdale.

These increases were partially offset by an aggregate decrease of approximately $835,000 including $777,000 at the Sofitel Chicago Magnificent Mile and $58,000 at The Notary Hotel.

This increase is primarily attributable to an increase of $1.7 million at the Sofitel Chicago Magnificent Mile related to a property tax refund received in the 2023 quarter and an aggregate increase of $1.9 million at 13 hotel properties.

These increases were partially offset by an aggregate decrease of approximately $1.1 million at two hotel properties.

Depreciation and Amortization .

Depreciation and amortization increased $10.2 million, or 17.7%, to $67.8 million for the 2023 period compared to the 2022 period.

This increase is comprised of $1.4 million at The Ritz-Carlton Reserve Dorado Beach, $7.1 million at the Four Seasons Resort Scottsdale and an aggregate increase of $4.8 million at eight comparable hotel properties.

These increases were partially offset by an aggregate decrease of $3.2 million at the Sofitel Chicago Magnificent Mile, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa and Cameo Beverly Hills, primarily due to fully depreciated assets.

Depreciation and amortization increased $2.9 million, or 12.9%, to $25.4 million for the 2024 quarter compared to the 2023 quarter.

This increase is comprised of an aggregate increase of $3.8 million at 12 hotel properties.

These increases were partially offset by an aggregate decrease of $856,000 at Sofitel Chicago Magnificent Mile, The Clancy, The Notary Hotel, and Pier House Resort & Spa, primarily due to fully depreciated assets.

Advisory Services Fee.

Advisory services fee increased $702,000, or 3.1%, to $23.2 million in the 2023 period compared to the 2022 period due to increases in reimbursable expenses of $2.6 million and base advisory fee of $1.3 million.

These increases are partially offset by decreases in equity-based compensation of $1.9 million and an incentive fee of $1.3 million.

In the 2023 period, we recorded an advisory services fee of $23.2 million, which included a base advisory fee of $10.7 million, reimbursable expenses of $6.1 million and $6.4 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

In the 2022 period, we recorded an advisory services fee of $22.5 million, which included a base advisory fee of $9.4 million, reimbursable expenses of $3.5 million, $8.3 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

and an incentive fee of $1.3 million.

Gain on Legal Settlements.

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

There was no such gain during the 2023 period.

Advisory services fee decreased $1.2 million, or 15.7%, to $6.7 million in the 2024 quarter compared to the 2023 quarter due to lower equity-based compensation of $1.2 million and base advisory fee of $313,000 partially offset by higher reimbursable expenses of $243,000.

In the 2024 quarter, we recorded an advisory services fee of $6.7 million, which included a base advisory fee of $3.3 million, reimbursable expenses of $2.3 million and $1.1 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

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

Corporate General and Administrative .

Corporate general and administrative expense was $9.2 million in the 2023 period compared to $14.0 million in the 2022 period.

The decrease in corporate general and administrative expenses is primarily due to lower reimbursed operating expenses of Ashford Securities of $3.6 million, lower miscellaneous expenses of $309,000, lower professional fees of $740,000 and lower public company costs of $166,000.

Corporate general and administrative expense was a credit of $2.2 million in the 2024 quarter compared to expense of $2.8 million in the 2023 quarter.

The change in corporate general and administrative expenses of $5.0 million is primarily attributable to a revision to the estimated contribution amount associated with the Fourth Amended and Restated Contribution Agreement with Ashford Securities that resulted in a $5.6 million expense reduction in the 2024 quarter.

This decrease was partially offset by higher professional fees of $1.8 million, higher miscellaneous expenses of $14,000, and higher public company costs of $4,000.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2023 period and the 2022 period, we recorded equity in loss of unconsolidated entity of $208,000 and $220,000, respectively, related to our investment in OpenKey.

Other Income (Expense).

Other income was $293,000 in the 2023 period compared to $27,000 in the 2022 period.

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

In the 2024 quarter and the 2023 quarter, we recorded equity in loss of unconsolidated entity of $49,000 and $73,000, respectively, related to our investment in OpenKey.

Interest Income .

Interest income was $5.4 million and $932,000 in the 2023 period and the 2022 period, respectively.

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

Interest income was $796,000 and $2.1 million in the 2024 quarter and the 2023 quarter, respectively.

The decrease in interest income in the 2024 quarter was primarily attributable to lower excess cash balances in the 2024 quarter compared to the 2023 quarter.

Interest Expense and Amortization of Discounts and Loan Costs .

Interest expense and amortization of discounts and loan costs increased $36.5 million, or 109.6%, to $69.8 million for the 2023 period compared to the 2022 period.

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

Interest expense and amortization of discounts and loan costs increased $3.6 million, or 15.8%, to $26.5 million for the 2024 quarter compared to the 2023 quarter.

The increase is primarily due to higher interest expense from higher average interest rates.

The average SOFR rates for the 2024 quarter and the 2023 quarter were 5.33% and 4.50%, respectively.

LIBOR ceased to be published after June 30, 2023.

The average LIBOR rate for the 2022 period was 1.24%.

The average SOFR rates for the 2023 period and the 2022 period were 4.78% and 0.97%, respectively.

The average LIBOR rate for the 2023 quarter was 4.62%.

Write-off of Loan Costs and Exit Fees.

Write-off of loan costs and exit fees was $2.8 million in the 2023 period related to various loan modifications and costs associated with the $200 million secured credit facility.

Write-off of loan costs and exit fees was $106,000 in the 2022 period, primarily resulting from the refinance of the Park Hyatt Beaver Creek Resort & Spa in February 2022, the acquisition of The Ritz-Carlton Reserve Dorado Beach and the mortgage loan extension of The Ritz-Carlton St.

Write-off of loan costs and exit fees was $721,000 in the 2024 quarter related to various loan refinances and modifications.

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

Gain (loss) on Extinguishment of Debt.

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

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

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

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

There was no such gain or loss in the 2024 quarter.

Realized and Unrealized Gain (Loss) on Derivatives .

Realized and unrealized gain on derivatives of $918,000 for the 2023 period consisted of unrealized gain on warrants of $273,000 and a realized gain of $6.2 million associated with payments received from counterparties on in-the-money interest rate caps.

These gains were partially offset by an unrealized loss on interest rate caps of approximately $5.5 million.

Unrealized gain on derivatives of $4.0 million for the 2022 period consisted of an unrealized gain of approximately $3.0 million on interest rate caps and approximately $995,000 from warrants.

Realized and unrealized gain on derivatives of $932,000 for the 2024 quarter consisted of an unrealized gain on warrants of $12,000 and a realized gain of $1.7 million associated with payments received from counterparties on in-the-money interest rate caps, partially offset by an unrealized loss on interest rate caps of approximately $751,000.

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

Income Tax (Expense) Benefit .

Income tax expense decreased $2.7 million, from $3.8 million in the 2022 period to $1.1 million in the 2023 period.

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

Income tax expense decreased $877,000, from $2.3 million in the 2023 quarter to $1.5 million in the 2024 quarter.

This decrease was primarily due to a decrease in the taxable income of certain of our TRS entities in the 2024 quarter compared to the 2023 quarter.

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

Our noncontrolling interest partner in consolidated entities was allocated income of $1.7 million and $2.3 million in the 2023 period and the 2022 period, respectively.

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

Our noncontrolling interest partner in consolidated entities was allocated loss of $743,000 and income of $309,000 in the 2024 quarter and the 2023 quarter, respectively.

At both March 31, 2024 and 2023, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

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

Noncontrolling interests in operating partnership were allocated a net loss of $3.0 million in the 2023 period and net income of $647,000 in the 2022 period.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 6.63% and 7.66% as of September 30, 2023 and 2022, respectively.

Noncontrolling interests in operating partnership were allocated net income of $296,000 in the 2024 quarter and $261,000 in the 2023 quarter.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 7.75% and 7.47% as of March 31, 2024 and 2023, respectively.

LIQUIDITY AND CAPITAL RESOURCES

6 unchanged sentences

• capital expenditures to improve our hotel properties.

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

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

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

6 unchanged sentences

However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity and market perceptions about us.

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

The success of our business strategy will

depend, in part, on our ability to access these various capital sources.

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

11 unchanged sentences

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

As of September 30, 2023, none of our mortgage loans were subject to cash traps.

As of September 30, 2023, the Company held cash and cash equivalents of $149.5 million and restricted cash of $57.3 million, the vast majority of which is comprised of lender and manager-held reserves.

As of September 30, 2023, $14.2 million was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs.

At September 30, 2023, our net debt to gross assets was 38.6%.

As of March 31, 2024, The Ritz-Carlton Lake Tahoe was in a cash trap, although there was no cash trapped for this mortgage loan.

As of March 31, 2024, the Company held cash and cash equivalents of $137.1 million and restricted cash of $82.4 million, the vast majority of which is comprised of lender and manager-held reserves.

As of March 31, 2024, $23.8 million was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs.

At March 31, 2024, our net debt to gross assets was 39.6%.

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

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Equity Transactions

On December 7, 2022, our board of directors approved a new stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share, having an aggregate value of up to $25 million.

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

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

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

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

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

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

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

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

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

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

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

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

during regular trading hours.

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

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

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

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

There are no other restrictions on future financing transactions.

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

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

As of November 6, 2023, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $10.0 million under the SEDA.

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

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

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

As of November 6, 2023, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.

As of May 7, 2024, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.

The Company intends to begin share repurchases as soon as practicable and may repurchase shares through open market transactions, privately negotiated transactions or other means.

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

Debt Transactions

On January 18, 2023, the Company repaid its $54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach, which resulted in a gain on extinguishment of debt of $2.3 million for the nine months ended September 30, 2023.

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

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

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

The loan is being extended beyond its original initial maturity in June 2023 for an additional 12 months.

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

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

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

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

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

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 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);