Braemar Hotels & Resorts Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As used in this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the references to “we,” “us,” “our,” the “Company” or “Braemar” refer to Braemar Hotels & Resorts Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Braemar Hospitality Limited Partnership, a Delaware limited partnership, which we refer to as “our operating partnership” or “Braemar OP.” “Our TRSs” refers to our taxable REIT subsidiaries, including Braemar TRS Corporation, a Delaware corporation, which we refer to as “Braemar TRS,” and its subsidiaries, together with the two taxable REIT subsidiaries that lease our two hotels held in a consolidated joint venture and are wholly owned by the joint venture and the U.S. Virgin Islands’ (“USVI”) taxable REIT subsidiary that owns The Ritz-Carlton St. Thomas hotel. “Ashford Trust” refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership and Ashford Trust’s operating partnership, which we refer to as “Ashford Trust OP.” “Ashford Inc.” refers to Ashford Inc., a Nevada corporation and, as the context may require, its consolidated subsidiaries. “Ashford LLC” or our “Advisor” refers to Ashford Hospitality Advisors LLC, a Delaware limited liability company and a subsidiary of Ashford Inc. “Premier” refers to Premier Project Management LLC, a Maryland limited liability company and a subsidiary of Ashford LLC. “Remington Hospitality” refers to the same entity after the acquisition was completed resulting in Remington Lodging & Hospitality, LLC becoming a subsidiary of Ashford Inc. This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains registered trademarks that are the exclusive property of their respective owners, which are companies other than us, including Marriott International®, Hilton Worldwide®, Sofitel®, Hyatt® and Accor®. FORWARD-LOOKING STATEMENTS Throughout this Form 10-Q, we make forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature: • our business and investment strategy; • anticipated or expected purchases or sales of assets; • our projected operating results; • completion of any pending transactions; • our understanding of our competition; • projected capital expenditures; and • the impact of technology on our operations and business. Such forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our securities. Additionally, the following factors could cause actual results to vary from our forward-looking statements: • 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; • 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; • 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; 31 • general volatility of the capital markets and the market price of our common and preferred stock; • general business and economic conditions affecting the lodging and travel industry; • changes in our business or investment strategy; • availability, terms and deployment of capital; • 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; • the degree and nature of our competition; • actual and potential conflicts of interest with Ashford Trust, Ashford Inc. 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; • changes in governmental regulations, accounting rules, tax rates and similar matters; • legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”) and related rules, regulations and interpretations governing the taxation of REITs; • limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and • 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. Risk Factors” in Part I of our 2023 10-K and this Form 10-Q, and the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, could cause our actual results and performance to differ significantly from those contained in our forward-looking statements. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Form 10-Q. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Form 10-Q to conform these statements to actual results and performance, except as may be required by applicable law. Overview We are a Maryland corporation formed in April 2013 that invests primarily in high revenue per available room (“RevPAR”), luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by STR, LLC. Two times the U.S. national average was $196 for the year ended December 31, 2023. We have elected to be taxed as a REIT under the Code. We conduct our business and own substantially all of our assets through our operating partnership, Braemar OP. We operate in the direct hotel investment segment of the hotel lodging industry. As of March 31, 2024, we owned interests in 16 hotel properties in seven states, the District of Columbia, Puerto Rico and St. Thomas, U.S. Virgin Islands with 4,201 total rooms, or 3,963 net rooms, excluding those attributable to our joint venture partner. The hotel properties in our current portfolio are predominantly located in U.S. urban markets and resort locations with favorable growth characteristics resulting from multiple demand generators. 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 through an advisory agreement. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC. We do not operate any of our hotel properties directly; 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. Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. 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 32 and brokerage services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and mobile key technology. Mr. Monty J. Bennett, chairman and chief executive officer of Ashford Inc. and, together with Mr. 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 4,233,861 shares of Ashford Inc. common stock, which if converted as of March 31, 2024 would have increased the Bennetts’ ownership interest in Ashford Inc. to 63.2%. The 18,758,600 shares of Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 360,000 shares owned by trusts. As of March 31, 2024, Mr. Monty J. Bennett, chairman of our board of directors, and his father, Mr. Archie Bennett, Jr., together owned approximately 3,116,271 shares of our common stock (including common units, long-term incentive plan (“LTIP”) units and performance LTIP units), which represented an approximate 4.2% ownership in the Company. Recent Developments 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 33 -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 We use a variety of operating and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP, as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include: • Occupancy . Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of hotels in a given period. • ADR . ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We use ADR to assess the pricing levels that we are able to generate. • RevPAR. RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees. RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs. Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms. We also use funds from operations (“FFO”), Adjusted FFO, earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) and Adjusted EBITDAre as measures of the operating performance of our business. See “Non-GAAP Financial Measures.” 34 RESULTS OF OPERATIONS 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 Revenue Rooms $ 138,552 $ 137,527 $ 1,025 0.7 % Food and beverage 53,547 52,228 1,319 2.5 Other 26,980 25,546 1,434 5.6 Total hotel revenue 219,079 215,301 3,778 1.8 Expenses Hotel operating expenses: Rooms 28,264 27,358 (906) (3.3) Food and beverage 40,717 39,739 (978) (2.5) Other expenses 60,076 62,295 2,219 3.6 Management fees 6,976 6,705 (271) (4.0) Total hotel operating expenses 136,033 136,097 64 — Property taxes, insurance and other 10,685 8,116 (2,569) (31.7) Depreciation and amortization 25,420 22,521 (2,899) (12.9) Advisory services fee 6,700 7,948 1,248 15.7 Corporate general and administrative (2,226) 2,820 5,046 178.9 Total expenses 176,612 177,502 890 0.5 Operating income (loss) 42,467 37,799 4,668 12.3 Equity in earnings (loss) of unconsolidated entity (49) (73) 24 32.9 Interest income 796 2,108 (1,312) (62.2) 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 Income (loss) before income taxes 16,934 18,933 (1,999) (10.6) Income tax (expense) benefit (1,452) (2,329) 877 37.7 Net income (loss) 15,482 16,604 (1,122) (6.8) (Income) loss attributable to noncontrolling interest in consolidated entities 743 (309) 1,052 340.5 Net (income) loss attributable to redeemable noncontrolling interests in operating partnership (296) (261) (35) (13.4) Net income (loss) attributable to the Company $ 15,929 $ 16,034 $ (105) (0.7) % The following table illustrates the key performance indicators of our 16 hotel properties owned for the periods indicated: Three Months Ended March 31, 2024 2023 Occupancy 65.39 % 64.85 % ADR (average daily rate) $ 551.46 $ 559.16 RevPAR (revenue per available room) $ 360.59 $ 362.62 Rooms revenue (in thousands) $ 138,552 $ 137,527 Total hotel revenue (in thousands) $ 219,079 $ 215,301 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. 35 Rooms Revenue . 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): Hotel Property Favorable (Unfavorable) Rooms Revenue Occupancy (change in bps) ADR (change in %) Comparable Capital Hilton (1) (2) $ 355 68 0.6 % Marriott Seattle Waterfront 238 47 3.7 % The Notary Hotel (23) 170 (4.8) % The Clancy 612 538 (2.1) % Sofitel Chicago Magnificent Mile (192) (210) (2.7) % Pier House Resort & Spa (133) (201) (0.3) % The Ritz-Carlton St. Thomas 513 182 (0.4) % Park Hyatt Beaver Creek Resort & Spa (1,160) (274) (6.4) % Hotel Yountville (190) 58 (11.3) % The Ritz-Carlton Sarasota (1) 534 389 (2.3) % Hilton La Jolla Torrey Pines (367) (381) (1.5) % Bardessono Hotel and Spa (1) (623) (723) (11.0) % The Ritz-Carlton Lake Tahoe (1,155) (730) 0.1 % Cameo Beverly Hills (907) (828) (20.4) % 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) % ________ (1) This hotel was under renovation during the 2024 quarter. (2) This hotel was under renovation during the 2023 quarter. Food and Beverage Revenue . 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 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 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 $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 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. 36 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 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. 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 $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 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 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 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 $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 $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 2023 quarter was 4.62%. Write-off of Loan Costs and Exit Fees. 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. 37 Gain (loss) on Extinguishment of Debt. Gain on extinguishment of debt was $2.3 million in the 2023 quarter due to the payoff of The Ritz-Carlton Reserve Dorado Beach mortgage loan. 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 2024 quarter. Realized and Unrealized Gain (Loss) on Derivatives . 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 $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 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 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 Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including: • advisory fees payable to Ashford LLC; • recurring maintenance necessary to maintain our hotel properties in accordance with brand standards; • interest expense and scheduled principal payments on outstanding indebtedness; • dividends on our common stock; • dividends on our preferred stock; and • 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, 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. The minimum base advisory fee is equal to the greater of: (i) 90% of the base fee paid for the same month in the prior fiscal year; and (ii) 1/12 th of the “G&A Ratio” for the most recently completed fiscal quarter multiplied by our total market capitalization on the last balance sheet date included in the most recent quarterly report on Form 10-Q or annual report on Form 10-K that we file with the SEC. Thus, even if our total market capitalization and performance decline, we will still be required to make payments to our Advisor equal to the minimum base advisory fee, which could adversely impact our liquidity and financial condition. Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotel properties and redevelopments, renovations, expansions and other capital expenditures that need to be made periodically with respect to our hotel properties and scheduled debt payments. We expect to meet our long-term liquidity requirements through various sources of capital, including future common and preferred equity issuances, existing working capital, net cash provided by operations, hotel mortgage indebtedness and other secured and unsecured borrowings. 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 38 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. federal income tax purposes. Our hotel properties will require periodic capital expenditures and renovation to remain competitive. In addition, acquisitions, redevelopments or expansions of hotel properties may require significant capital outlays. We may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures, acquisitions or hotel redevelopment through retained earnings is very limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects could be materially and adversely affected. Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties declines. When these provisions are triggered, substantially all of the profit generated by the hotel properties securing such loan is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. This could affect our liquidity and our ability to make distributions to our stockholders until such time that a cash trap is no longer in effect for such loan. These cash trap provisions have been triggered on one mortgage loan, as discussed below. Our loan that is in a cash trap may remain subject to the cash trap provisions for a substantial period of time which could limit our flexibility and adversely affect our financial condition or our qualification as a REIT. As of 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. Treasury securities with maturity dates of less than 90 days and corporate cash held at commercial banks in Insured Cash Sweep (“ICS”) accounts, which are fully insured by the FDIC. The Company’s cash and cash equivalents also includes property-level operating cash deposited with commercial banks that have been designated as a Global Systemically Important Bank (“G-SIB”) by the Financial Stability Board (“FSB”) and a small amount deposited with other commercial banks. Equity Transactions 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”). The registration statement became effective on February 21, 2020, and contemplates the issuance and sale of up to 20,000,000 shares of Series E Preferred Stock or Series M Preferred Stock in a primary offering and up to 8,000,000 shares of Series E Preferred Stock or Series M Preferred Stock pursuant to a dividend reinvestment plan. On February 25, 2020, we filed our prospectus with the SEC. Ashford Securities, a subsidiary of Ashford Inc., serves as the dealer manager and wholesaler of the Series E Preferred Stock and Series M Preferred Stock. On April 2, 2021, the Company filed with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”) articles supplementary to the Company’s Articles of Amendment and Restatement that provided for: (i) reclassifying the existing 28,000,000 shares of Series E Preferred Stock and 28,000,000 shares of Series M Preferred Stock as unissued shares of preferred stock; (ii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series E Preferred Stock (the “Series E Articles Supplementary”); and (iii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series M Preferred Stock (the “Series M Articles Supplementary”). The Series E Articles Supplementary and Series M Articles Supplementary were filed to revise the preferred stock terms related to the dividend rate, our optional redemption right and certain other voting rights. The Company also caused its operating partnership to execute Amendment No. 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. The Company issued approximately 16.4 million shares of Series E Preferred Stock and received net proceeds of approximately $369.5 million and issued approximately 2.0 million shares of Series M Preferred Stock and received net proceeds of approximately $47.6 million. On February 21, 2023, the Company announced the closing of its offering of the Series E Preferred Stock and Series M Preferred Stock. 39 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. 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 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. 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. Debt Transactions 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%. 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%. In April 2024, the Company repaid the $30.0 million mortgage loan secured by the Cameo Beverly Hills hotel. Sources and Uses of Cash We had approximately $137.1 million and $85.6 million of cash and cash equivalents at March 31, 2024 and December 31, 2023, respectively. We anticipate that our principal sources of funds to meet our cash requirements will include cash on hand, positive cash flow from operations and capital market activities. Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities were $36.0 million and $42.3 million for the three months ended March 31, 2024 and 2023, respectively. Cash flows from operations were impacted by changes in hotel operations. Cash flows from operations are also impacted by the timing of working capital cash flows, such as collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties and settling with hotel managers. Net Cash Flows Provided by (Used in) Investing Activities . For the three months ended March 31, 2024, net cash flows used in investing activities were $22.8 million. These cash outflows were primarily attributable to $23.3 million of capital improvements made to various hotel properties partially offset by cash inflows of $504,000 related to proceeds from property insurance. Our capital improvements consisted of approximately $17.6 million of return on investment capital projects and approximately $5.7 million of renewal and replacement capital projects. For the three months ended March 31, 2023, net cash flows used in investing activities were $18.7 million. These cash outflows were primarily attributable to $18.7 million of capital improvements made to various hotel properties and a $99,000 loan to OpenKey partially offset by cash inflows of $75,000 related to proceeds from property insurance. Our capital improvements consisted of approximately $13.8 million of return on investment capital projects and approximately $4.9 million of renewal and replacement capital projects. 40 Return on investment capital projects are designed to improve the positioning of our hotel properties within their markets and competitive sets. Renewal and replacement capital projects are designed to maintain the quality and competitiveness of our hotels. Net Cash Flows Provided by (Used in) Financing Activities. For the three months ended March 31, 2024, net cash flows provided by financing activities were $39.7 million. Cash inflows primarily consisted of cash inflows of $62.0 million from borrowings on indebtedness and $1.6 million of proceeds from in-the-money interest rate caps. These cash inflows were partially offset by cash outflows primarily consisting of $13.1 million of dividend and distribution payments, $991,000 to purchase interest rate caps, $3.2 million of payments of loan costs and exit fees, and $6.6 million for cash redemptions of Series E and Series M preferred stock. For the three months ended March 31, 2023, net cash flows provided by financing activities were $5.3 million. Cash inflows primarily consisted of $98.0 million from the issuance of preferred stock, contributions from noncontrolling interest in consolidated entities of $2.0 million and $1.6 million of proceeds from in-the-money interest rate caps. The cash inflows were partially offset by repayments of indebtedness of $54.3 million, $12.6 million of dividend and distribution payments, $19.0 million of payments to repurchase common stock, payments of $7.0 million for the redemption of operating partnership units, $2.0 million of distributions to noncontrolling interests in consolidated entities, $755,000 to purchase interest rate caps, payments of loan costs and exit fees of $404,000 and $307,000 for cash redemptions of Series E and Series M preferred stock. Dividend Policy. On December 5, 2023, our board of directors approved the Company’s dividend policy for 2024. The Company expects to pay a quarterly cash dividend of $0.05 per share for the Company’s common stock for 2024, or $0.20 per share on an annualized basis. On January 3, 2024, our board of directors declared a quarterly cash dividend of $0.05 per diluted share, for the first quarter of 2024. The approval of our dividend policy does not commit our board of directors to declare future dividends with respect to any quantity or the amount thereof. The board will continue to review our dividend policy on a quarter-to-quarter basis and make announcements with respect thereto. For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof. Seasonality Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as pandemics, extreme weather conditions, natural disasters, terrorist attacks or alerts, civil unrest, government shutdowns, airline strikes or reduced airline capacity, economic factors and other considerations affecting travel. To the extent that cash flows from operations and cash on hand are insufficient during any quarter due to temporary or seasonal fluctuations in lease revenue, we expect to utilize borrowings to fund distributions required to maintain our REIT status. However, we cannot make any assurances that we will make distributions in the future. Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K. There have been no material changes in these critical accounting policies. Non-GAAP Financial Measures The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO are presented to help our investors evaluate our operating performance. EBITDA is defined as net income (loss) before interest expense and amortization of loan costs, depreciation and amortization, income taxes, equity in (earnings) loss of unconsolidated entity and after the Company’s portion of EBITDA of OpenKey. In addition, we exclude impairment on real estate, (gain) loss on insurance settlement and disposition of assets and Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by NAREIT. 41 We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable) contract assets (liabilities), transaction and conversion costs, other income/expense, write-off of loan costs and exit fees, gain/loss on insurance settlements, advisory and settlement costs, advisory services incentive fee, gain/loss on extinguishment of debt, stock/unit-based compensation and the Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/ loss on derivatives. We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because they provide investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe they help investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions. EBITDA, EBITDAre and Adjusted EBITDAre as calculated by us may not be comparable to EBITDA, EBITDAre and Adjusted EBITDAre reported by other companies that do not define EBITDA, EBITDAre and Adjusted EBITDAre exactly as we define the terms. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as an indicator of liquidity. The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited): Three Months Ended March 31, 2024 2023 Net income (loss) $ 15,482 $ 16,604 Interest expense and amortization of loan costs 26,491 22,873 Depreciation and amortization 25,420 22,521 Income tax expense (benefit) 1,452 2,329 Equity in (earnings) loss of unconsolidated entity 49 73 Company’s portion of EBITDA of OpenKey (57) (77) EBITDA and EBITDAre 68,837 64,323 Amortization of favorable (unfavorable) contract assets (liabilities) 119 119 Transaction and conversion costs (5,627) 1,195 Write-off of premiums, loan costs and exit fees 721 12 Realized and unrealized (gain) loss on derivatives (932) 334 Stock/unit-based compensation 1,127 2,328 Legal, advisory and settlement costs 1,947 69 (Gain) loss on extinguishment of debt — (2,318) Adjusted EBITDAre $ 66,192 $ 66,062 42 FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to common stockholders, computed in accordance with GAAP, excluding gains or losses on insurance settlement and disposition of assets, plus impairment charges on real estate, depreciation and amortization of real estate assets, and after redeemable noncontrolling interests in the operating partnership and adjustments for unconsolidated entities. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. Our calculation of Adjusted FFO excludes transaction and conversion costs, other income/expense, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, stock/unit-based compensation, gain/loss on insurance settlements, gain/loss on extinguishment of debt, and non-cash items such as deemed dividends on redeemable preferred stock, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives and the Company’s portion of adjustments to FFO of OpenKey. FFO and Adjusted FFO exclude amounts attributable to the portion of a partnership owned by the third-party. We present FFO and Adjusted FFO because we consider FFO and Adjusted FFO important supplemental measures of our operational performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and Adjusted FFO when reporting their results. FFO and Adjusted FFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and Adjusted FFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and Adjusted FFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. We consider FFO and Adjusted FFO to be appropriate measures of our ongoing normalized operating performance as a REIT. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO and Adjusted FFO do not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income or loss as an indication of our financial performance or GAAP cash flows from operating activities as a measure of our liquidity. FFO and Adjusted FFO are also not indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO and Adjusted FFO should be considered along with our net income or loss and cash flows reported in our condensed consolidated financial statements. 43 The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited): Three Months Ended March 31, 2024 2023 Net income (loss) $ 15,482 $ 16,604 (Income) loss attributable to noncontrolling interest in consolidated entities 743 (309) Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership (296) (261) Preferred dividends (10,407) (10,350) Deemed dividends on preferred stock (1,998) (2,454) Net income (loss) attributable to common stockholders 3,524 3,230 Depreciation and amortization on real estate (1) 24,180 21,785 Net income (loss) attributable to redeemable noncontrolling interests in operating partnership 296 261 Equity in (earnings) loss of unconsolidated entity 49 73 Company’s portion of FFO of OpenKey (67) (78) FFO available to common stockholders and OP unitholders 27,982 25,271 Deemed dividends on preferred stock 1,998 2,454 Transaction and conversion costs (5,627) 1,195 Write-off of premiums, loan costs and exit fees 721 12 Unrealized (gain) loss on derivatives 739 2,201 Stock/unit-based compensation 1,127 2,328 Legal, advisory and settlement costs 1,947 69 Interest expense accretion on refundable membership club deposits 165 178 Amortization of loan costs 1,208 739 (Gain) loss on extinguishment of debt — (2,318) Adjusted FFO available to common stockholders and OP unitholders $ 30,260 $ 32,129 ____________________ (1) Net of adjustment for noncontrolling interest in consolidated entities. The following table presents the amounts of the adjustments for noncontrolling interests for each line item: Three Months Ended March 31, 2024 2023 Depreciation and amortization on real estate $ (1,240) $ (736) Amortization of loan costs (103) (23) 44 The following table presents certain information related to our hotel properties: Hotel Property Location Total Rooms % Owned Owned Rooms Fee Simple Properties Capital Hilton Washington, D.C. 559 75 % 419 Marriott Seattle Waterfront Seattle, WA 369 100 % 369 The Notary Hotel Philadelphia, PA 499 100 % 499 The Clancy San Francisco, CA 410 100 % 410 Sofitel Chicago Magnificent Mile Chicago, IL 415 100 % 415 Pier House Resort & Spa Key West, FL 142 100 % 142 The Ritz-Carlton St. Thomas St. Thomas, USVI 180 100 % 180 Park Hyatt Beaver Creek Resort & Spa Beaver Creek, CO 193 100 % 193 Hotel Yountville Yountville, CA 80 100 % 80 The Ritz-Carlton Sarasota Sarasota, FL 276 100 % 276 The Ritz-Carlton Lake Tahoe (1) Truckee, CA 170 100 % 170 Cameo Beverly Hills (2) Los Angeles, CA 143 100 % 143 The Ritz-Carlton Reserve Dorado Beach (3) Dorado, Puerto Rico 96 100 % 96 Four Seasons Resort Scottsdale Scottsdale, AZ 210 100 % 210 Ground Lease Properties (4) Hilton La Jolla Torrey Pines (5) La Jolla, CA 394 75 % 296 Bardessono Hotel and Spa (6) Yountville, CA 65 100 % 65 Total 4,201 3,963 ________ (1) The above information does not include the operations of the voluntary rental program with respect to condominium units not owned by the Company. (2) Includes 138 hotel rooms and five residences adjacent to the hotel. On August 1, 2023, the Company announced the rebranding and planned conversion of its Mr. C Beverly Hills in Los Angeles, California to the Cameo Beverly Hills. Following an extensive renovation, which is expected to be completed by the end of 2025, the hotel will join LXR Hotels & Resorts. (3) The above information does not include the operations of the voluntary rental program with respect to residential units not owned by the Company. (4) Some of our hotel properties are on land subject to ground leases, two of which cover the entire property. (5) The ground lease expires in 2067. The ground lease contains one extension option of either 10 or 20 years dependent upon capital investment during the lease term. (6) The initial ground lease expires in 2065. The ground lease contains two 25-year extension options, at our election.