What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 310 added, 116 removed, 425 unchanged (50% of the section changed)

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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;

• 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,” “Properties” and other filings under the Exchange Act;

• changes in interest rates and inflation;

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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.

As of June 30, 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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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.

As of June 30, 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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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.

and brokerage services, insurance policies covering general liability, workers compensation and claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services, mobile key technology and cash management services.

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.

Archie Bennett, Jr.

(the “Bennetts”), as of June 30, 2024, hold a controlling interest in Ashford Inc.

The Bennetts owned approximately 810,261 shares of Ashford Inc.

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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 4,310,933 shares of Ashford Inc.

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

common stock, which if converted as of June 30, 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 March 31, 2024, Mr.

As of June 30, 2024, Mr.

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

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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.

approved funding up to an additional $1.0 million, in the aggregate, for OpenKey, allocated pro rata among them.

On July 1, 2024, the Company funded $79,000.

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

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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.

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

As of June 30, 2024, no common stock has been repurchased.

On July 2, 2024, Braemar, Ashford Trust and Ashford Inc.

(collectively with the Company, Ashford Trust and each of Ashford Inc.’s, the Company’s and Ashford Trust’s respective affiliates (including Stirling Hotels & Resorts, Inc.) and any entity advised by Ashford Inc., the “Company Group”) entered into a Cooperation Agreement (the “Agreement”) with Blackwells Capital LLC, Blackwells Onshore I LLC, Blackwells Holding Co.

LLC, Vandewater Capital Holdings, LLC, Blackwells Asset Management LLC, BW Coinvest Management I LLC and Jason Aintabi (collectively, the “Blackwells Parties”) regarding the withdrawal of the Blackwells Parties’ proxy campaign, dismissal of pending litigation involving the parties and certain other matters.

Pursuant to the Agreement, the Blackwells Parties have agreed to withdraw (i) the notice delivered to the Company on March 10, 2024 purporting to nominate four director candidates to the Company’s board of directors (the “Board”) and make certain other proposals and (ii) the definitive proxy statement filed with the U.S.

Securities and Exchange Commission (the “SEC”) on April 3, 2024 to solicit proxies from stockholders of the Company to vote in favor of the Blackwells Parties’ director nominees and proposals.

In connection therewith, the Blackwells Parties will cease to take any further action with respect to the Company’s 2024 Annual Meeting of Stockholders, except as otherwise provided for in the Agreement.

The Blackwells Parties have also agreed to specified standstill restrictions with respect to the Company Group, which will expire on July 2, 2034.

During the standstill period, the Blackwells Parties are required to (i) appear in person or by proxy at each meeting of stockholders of the members of the Company Group in which they beneficially own shares of stock and vote any Blackwells Parties’ shares then beneficially owned by them in accordance with the recommendation of the board of directors of such member of the Company Group on any proposals considered at such meeting and (ii) deliver consents or consent revocations in any action by written consent by stockholders of any member of the Company Group in which they

beneficially own shares in accordance with the recommendation of the board of directors of such member of the Company Group.

The Agreement also provides for the voluntary dismissal, with prejudice, of the consolidated action pending in the U.S.

District Court for the Northern District of Texas to which the Company, Blackwells Capital LLC and certain of their respective related parties are parties (the “Consolidated Litigation”).

The Company has agreed to reimburse Blackwells Capital LLC, in an amount agreed upon by the parties, for the Blackwells Parties’ reasonable attorneys’ fees and expenses incurred in connection with the Consolidated Litigation and related matters.

Additionally, pursuant to the Agreement, the Board will take steps to identify and select one additional individual to be appointed to the Board as an independent director (the “Additional Board Member”).

The Board is required to promptly notify Blackwells Capital LLC of its selection of the Additional Board Member and to consider any input Blackwells Capital LLC may have with respect to the Additional Board Member.

The Agreement contains various other obligations and provisions applicable to the Company Group and the Blackwells Parties, including a mutual release of claims and mutual non-disparagement.

Concurrently and in connection with the Agreement, certain of the parties thereto have also entered into a Share Ownership Agreement (the “Share Ownership Agreement”) and a Loan Agreement (the “Loan Agreement”), pursuant to which agreements the Company will provide to BW Coinvest I, LLC (“Borrower”) an unsecured loan (the “Loan”).

The proceeds from the Loan will be used to reimburse Borrower for 70% of the amount expended by Borrower to purchase on the open market a total of 3,500,000 shares of the Company’s common stock (the “Purchased Shares”) within six months of the date of Loan Agreement, at a price per Purchased Share not to exceed $10 and subject to the other limitations set forth therein.

The Loan has a term of five years (the “Term”), is guaranteed by Jason Aintabi, Vandewater Capital Holdings, LLC, Blackwells Holding Co.

LLC, and Blackwells Asset Management LLC and shall bear payment-in-kind interest during the Term at a rate equal to the sum of (a) Term SOFR (as defined in the Loan Agreement) and (b) 3.00% (three hundred basis points) per annum.

The Company has agreed to reimburse Blackwells Capital LLC, in an amount agreed upon by the parties, for the Blackwells Parties’ reasonable due diligence expenses incurred on or prior to the date of the Share Ownership Agreement.

As of August 7, 2024, the Company has loaned approximately $4.1 million that has been used to purchase approximately 1.7 million shares of Braemar common stock.

On July 17, 2024, we sold the Hilton La Jolla Torrey Pines hotel pursuant to an Agreement of Purchase and Sale, entered into effective May 6, 2024, for $165 million in cash, subject to customary pro-rations and adjustments.

The Company owned an indirect 75% equity interest in the hotel property.

Additionally, the Company repaid the $66.6 million mortgage loan secured by the hotel property.

On August 7, 2024, the Company closed on a refinancing involving five hotels.

The new loan totals $407 million and has a two-year initial term with three one-year extension options, subject to the satisfaction of certain conditions, taking the final maturity to 2029.

The loan is interest only and provides for a floating interest rate of SOFR + 3.24%.

As part of this financing, the Company acquired $42.2 million of the most junior tranche of the loan, which lowered its net spread on the $364.8 million remaining loan amount to SOFR + 3.01%.

The loan is secured by five hotels:

Pier House Resort & Spa, Bardessono Hotel & Spa, Hotel Yountville, The Ritz-Carlton Sarasota, and The Ritz-Carlton St.

The new loan refinanced the $80.0 million loan secured by the Pier House Resort & Spa which had an interest rate of SOFR + 3.60% and had a final maturity date in September 2025, the $42.5 million loan secured by The Ritz-Carlton St.

Thomas which had an interest rate of SOFR + 4.35% and had a final maturity date in August 2026, and the $200.0 million secured credit facility secured by The Ritz-Carlton Sarasota, Hotel Yountville, and Bardessono Hotel & Spa which had an interest rate of SOFR + 3.10% and had a final maturity date in July 2027.

The Company, Braemar OP, Braemar TRS, Ashford Inc.

and Ashford Hospitality Advisors LLC (together with Ashford Inc., the “Advisor”), are parties to that certain Fifth Amended and Restated Advisory Agreement, dated as of April 23, 2018 (as amended, the “Advisory Agreement”).

The Company has a mortgage loan maturing in June 2025 with an outstanding principal balance of approximately $293 million (the “Loan”) secured by four hotel properties:

The Notary Hotel;

Sofitel Chicago Magnificent Mile;

and Marriott Seattle Waterfront (the “Hotel Properties”).

On August 8, 2024, the parties to the Advisory Agreement entered into a Limited Waiver Under Advisory Agreement (the “Waiver Agreement”) that provides, among other things, as follows:

(i) From August 8, 2024 until the earlier of (i) November 15, 2025 and (ii) the refinancing of the Loan (the “Loan Outside Date”), the Advisor waives the operation of Section 12.4(a) of the Advisory Agreement that would permit the Advisor to terminate the Advisory Agreement occurring solely as a result from the sale or disposition of one or more of the Hotel

Properties as a result of a mortgage foreclosure, deed-in-lieu of mortgage foreclosure, mezzanine loan foreclosure or an assignment in-lieu of a mezzanine loan foreclosure following the failure of the Company to pay, upon the maturity of the Loan, all amounts due and payable thereunder (the “Limited Waiver”);

(ii) Upon the satisfaction of certain conditions, the Company may request the Advisor agree to amend the Waiver Agreement to extend the Loan Outside Date for a period not to exceed ninety (90) days from November 15, 2025 and if the Advisor agrees to such amendment, the Advisor shall not be entitled to any further consideration in respect thereof;

(iii) If the members of the Board of Directors of the Company (the “Board”) change such that members who constitute the Board as of August 8, 2024 (the “Incumbent Board”) no longer constitute at least a majority of the Board (other than those whose election to the Board is approved or recommended to stockholders of the Company by a vote of at least a majority of the Incumbent Board), the Limited Waiver shall be null and void ab initio (but the consideration provided by the Company to the Advisor as described in item (iv) below shall remain in force);

(iv) In exchange for the Limited Waiver and the other agreements provided by the Advisor in the Waiver Agreement, the Company agrees to pay the Advisor an amount equal to the Advisor’s obligation under the Advisor’s current employment agreement with Richard J.

Stockton, the Company’s President and Chief Executive Officer (the “Stockton Employment Agreement”), to pay Mr.

Stockton a multiple of his Base Salary (as defined in the Stockton Employment Agreement) that becomes payable by the Advisor to Mr.

Stockton as the result of the occurrence of certain events as more fully described in the Waiver Agreement.

Key Indicators of Operating Performance

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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)

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

The following table summarizes changes in key line items from our condensed consolidated statements of operations for three months ended June 30, 2024 and 2023 (in thousands except percentages):

Three Months Ended June 30, Favorable (Unfavorable)

2024 2023 $ Change % Change

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Other 23,797 21,794 2,003 9.2

Total revenue 187,587 186,707 880 0.5

Hotel operating expenses:

Rooms 27,476 26,705 (771) (2.9)

Food and beverage 36,664 36,365 (299) (0.8)

Other expenses 58,155 56,297 (1,858) (3.3)

Management fees 6,068 5,880 (188) (3.2)

Total hotel operating expenses 128,363 125,247 (3,116) (2.5)

Property taxes, insurance and other 10,058 9,396 (662) (7.0)

Depreciation and amortization 24,694 22,567 (2,127) (9.4)

Advisory services fee 7,828 8,215 387 4.7

Corporate general and administrative 4,469 3,896 (573) (14.7)

Total expenses 175,412 169,321 (6,091) (3.6)

Operating income (loss) 12,175 17,386 (5,211) (30.0)

Equity in earnings (loss) of unconsolidated entity (85) (75) (10) (13.3)

Interest income 1,072 2,295 (1,223) (53.3)

Interest expense and amortization of loan costs (27,285) (23,600) (3,685) (15.6)

Write-off of loan costs and exit fees (82) (248) 166 66.9

Gain (loss) on extinguishment of debt

Realized and unrealized gain (loss) on derivatives 326 1,029 (703) (68.3)

Income (loss) before income taxes (13,901) (3,213) (10,688) (332.6)

Income tax (expense) benefit 114 75 39 (52.0)

Net income (loss) (13,787) (3,138) (10,649) 339.4

(Income) loss attributable to noncontrolling interest in consolidated entities 303 367 (64) 17.4

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership 1,919 925 994 107.5

Net income (loss) attributable to the Company $ (11,565) $ (1,846) $ (9,719) (526.5) %

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

Three Months Ended June 30,

Occupancy 72.82 % 70.91 %

ADR (average daily rate) $ 415.24 $ 430.68

RevPAR (revenue per available room) $ 302.37 $ 305.39

Rooms revenue (in thousands) $ 116,227 $ 117,137

Total hotel revenue (in thousands) $ 187,587 $ 186,707

Net Income (Loss) Attributable to the Company.

Net loss attributable to the Company increased $9.7 million, from $1.8 million for the three months ended June 30, 2023 (the “2023 quarter”) to $11.6 million for the three months ended June 30, 2024 (the “2024 quarter”), as a result of the factors discussed below.

Rooms Revenue .

Rooms revenue decreased $910,000, or 0.8%, to $116.2 million during the 2024 quarter compared to the 2023 quarter.

During the 2024 quarter, we experienced a 191 basis point increase in occupancy and a 3.6% decrease in room rates.

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 %)

Capital Hilton (2)

$ 2,079 719 6.9 %

Marriott Seattle Waterfront

593 171 5.0 %

The Notary Hotel 998 544 5.0 %

The Clancy (549) (469) (0.5) %

Sofitel Chicago Magnificent Mile 609 543 0.5 %

Pier House Resort & Spa (337) (258) (2.2) %

The Ritz-Carlton St.

Thomas (1,313) (447) (4.3) %

Park Hyatt Beaver Creek Resort & Spa 46 413 (8.6) %

Hotel Yountville 28 673 (9.5) %

The Ritz-Carlton Sarasota (2)

(31) 434 (6.7) %

Hilton La Jolla Torrey Pines 590 385 3.3 %

Bardessono Hotel and Spa (285) (51) (5.3) %

The Ritz-Carlton Lake Tahoe (1)

(616) (1,032) 6.0 %

Cameo Beverly Hills

(593) (914) (7.3) %

The Ritz-Carlton Reserve Dorado Beach (2,939) (1,028) (8.1) %

Four Seasons Resort Scottsdale 810 819 (5.7) %

Total $ (910) 191 (3.6) %

(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 decreased $213,000, or 0.4%, to $47.6 million during the 2024 quarter compared to the 2023 quarter.

This decrease is attributable to a decrease of $3.0 million at seven hotel properties.

These decreases were partially offset by an aggregate increase of $2.8 million at The Clancy, Four Seasons Resort Scottsdale, Hilton La Jolla Torrey Pines, Hotel Yountville, Marriott Seattle Waterfront, The Notary Hotel, Pier House Resort & Spa, The Ritz-Carlton St.

Thomas, Sofitel Chicago Magnificent Mile.

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $2.0 million, or 9.2%, to $23.8 million during the 2024 quarter compared to the 2023 quarter.

This increase is attributable to an aggregate increase in other hotel revenue of $2.6 million at 12 hotel properties, partially offset by an aggregate decrease of $575,000 at the Cameo Beverly Hills, The Notary Hotel, The Ritz-Carlton Lake Tahoe, and The Ritz-Carlton Reserve Dorado Beach.

Rooms Expense .

Rooms expense increased $771,000, or 2.9%, to $27.5 million in the 2024 quarter compared to the 2023 quarter.

This increase is primarily attributable to an aggregate increase of $1.5 million at 11 hotel properties, partially offset by an aggregate decrease of $714,000 at Cameo Beverly Hills, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton Lake Tahoe, The Ritz-Carlton Reserve Dorado Beach, and The Ritz-Carlton St.

Food and Beverage Expense .

Food and beverage expense increased $299,000, or 0.8%, to $36.7 million during the 2024 quarter compared to the 2023 quarter.

This increase is attributable to an aggregate increase of $1.9 million at 12 hotel properties, partially offset by an aggregate decrease of $1.6 million at the Bardessono Hotel and Spa, Cameo Beverly Hills, The Ritz-Carlton Lake Tahoe, and The Ritz-Carlton Reserve Dorado Beach.

Other Operating Expenses .

Other operating expenses increased $1.9 million, or 3.3%, to $58.2 million in the 2024 quarter compared to the 2023 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 a decrease of $150,000 in direct expenses and an increase of $2.0 million in indirect expenses and incentive management fees in the 2024 quarter as compared to the 2023 quarter.

Direct expenses were 4.2% of total hotel revenue in the 2024 quarter and 4.3% in the 2023 quarter.

The increase in indirect expenses comprises increases in:

(i) general and administrative costs of $1.1 million;

(ii) marketing costs of $74,000;

(iii) repairs and maintenance of $508,000;

and (iv) incentive management fees of $776,000.

The increases were partially offset by decreases in (i) energy costs of $294,000 and (ii) lease expense of $190,000.

Management Fees .

Base management fees increased $188,000, or 3.2%, to $6.1 million in the 2024 quarter compared to the 2023 quarter.

Base management fees increased by $506,000 at nine hotel properties, partially offset by an aggregate decrease of $318,000 at the Bardessono Hotel and Spa, Cameo Beverly Hills, The Clancy, Pier House Resort & Spa, The Ritz-Carlton Lake Tahoe, The Ritz-Carlton Reserve Dorado Beach, and The Ritz-Carlton St.

Property Taxes, Insurance and Other .

Property taxes, insurance and other increased $662,000, or 7.0%, to $10.1 million in the 2024 quarter compared to the 2023 quarter.

The increase is primarily attributable to an aggregate increase of approximately $1.1 million at 12 hotel properties.

These increases were partially offset by an aggregate decrease of $431,000 primarily at the Capital Hilton, Four Seasons Resort Scottsdale, Park Hyatt Beaver Creek Resort & Spa, and Sofitel Chicago Magnificent Mile.

Depreciation and Amortization .

Depreciation and amortization increased $2.1 million, or 9.4%, to $24.7 million in the 2024 quarter compared to the 2023 quarter.

There was an aggregate increase of $3.0 million at 12 hotel properties, partially offset by an aggregate decrease of $892,000 at The Clancy, The Notary Hotel, Pier House Resort & Spa, and Sofitel Chicago Magnificent Mile due to fully depreciated assets.

Advisory Services Fee.

Advisory services fee decreased $387,000, or 4.7%, to $7.8 million in the 2024 quarter compared to the 2023 quarter due to decreases of $1.6 million in equity-based compensation and $331,000 in the base advisory fee, partially offset by increases of $919,000 in reimbursable expenses and $648,000 in the incentive fee.

In the 2024 quarter, we recorded an advisory services fee of $7.8 million, which included a base advisory fee of $3.3 million, reimbursable expenses of $3.0 million, equity-based compensation of $883,000, and an incentive fee of $648,000.

In the 2023 quarter, we recorded an advisory services fee of $8.2 million, which included a base advisory fee of $3.7 million, reimbursable expenses of $2.0 million, and $2.5 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 $4.5 million in the 2024 quarter as compared to $3.9 million in the 2023 quarter.

The increase in corporate general and administrative expense is due to higher professional fees of $2.6 million, partially offset by lower reimbursed operating expenses of Ashford Securities of $1.0 million, lower miscellaneous expenses of $696,000 and lower public company costs of $316,000.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2024 quarter and 2023 quarter, we recorded equity in loss of unconsolidated entity of $85,000 and $75,000, respectively, related to our investment in OpenKey.

Interest Income .

Interest income was $1.1 million and $2.3 million in the 2024 quarter and 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 Loan Costs .

Interest expense and amortization of loan costs increased $3.7 million, or 15.6%, to $27.3 million in the 2024 quarter compared to the 2023 quarter.

This 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 4.74%, respectively.

The average LIBOR rate for the 2023 quarter was 5.10%.

Write-off of Loan Costs and Exit Fees.

Write-off of loan costs and exit fees was $82,000 in the 2024 quarter, primarily related to various loan modifications.

Write-off of loan costs and exit fees was $248,000 in the 2023 quarter, primarily related to various loan modifications.

Gain (loss) on Extinguishment of Debt.

In 2024 quarter, we recognized a loss of $22,000 attributable to the discount associated with the Cameo Beverly Hills mortgage loan that was repaid on April 9, 2024.

There was no such gain (loss) recognized in the 2023 quarter.

Realized and Unrealized Gain (Loss) on Derivatives .

Realized and unrealized gain on derivatives of $326,000 for 2024 quarter consisted of a realized gain of $1.5 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 $1.2 million.

Realized and unrealized gain on derivatives of $1.0 million for 2023 quarter consisted of an unrealized gain on warrants of approximately $16,000 and a realized gain of $2.3 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 $1.3 million.

Income Tax (Expense) Benefit .

Income tax benefit increased $39,000, from $75,000 in the 2023 quarter to $114,000 in the 2024 quarter.

This increase 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 $303,000 and $367,000 in the 2024 quarter and the 2023 quarter, respectively.

At both June 30, 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 $1.9 million and $925,000 in the 2024 quarter and the 2023 quarter, respectively.

Redeemable noncontrolling interests in Braemar OP represented ownership interests of 8.02% and 6.63% as of June 30, 2024 and 2023, respectively.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the six months ended June 30, 2024 and 2023 (in thousands except percentages):

Six Months Ended June 30, Favorable (Unfavorable)

2024 2023 $ Change % Change

Rooms $ 254,779 $ 254,664 $ 115 — %

Food and beverage 101,110 100,004 1,106 1.1

Other 50,777 47,340 3,437 7.3

Total hotel revenue 406,666 402,008 4,658 1.2

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

Three Months Ended March 31,

Six Months Ended June 30,

Occupancy 69.10 % 67.90 %

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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.

Net income attributable to the Company decreased $9.8 million from $14.2 million for the six months ended June 30, 2023 (the “2023 period”) to $4.4 million for the six months ended June 30, 2024 (the “2024 period”), as a result of the factors discussed below.

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.

Rooms revenue increased $115,000 to $254.8 million during the 2024 period compared to the 2023 period.

During the 2024 period, we experienced a 120 basis point increase in occupancy and a decrease of 2.4% in room rates compared to the 2023 period.

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

Hotel Property Favorable (Unfavorable)

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Marriott Seattle Waterfront

831 103 4.5 %

The Notary Hotel 975 351 1.5 %

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Total $ 115 120 (2.4) %

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

(2) This hotel was under renovation during the 2023 quarter.

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

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

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.

Food and beverage revenue increased $1.1 million, or 1.1%, to $101.1 million during the 2024 period compared to the 2023 period.

We experienced an aggregate increase in food and beverage revenue of $5.8 million at ten hotel properties.

These increases were partially offset by an aggregate decrease of approximately $4.7 million at Bardessono Hotel and Spa, Cameo Beverly Hills, Capital Hilton, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton Lake Tahoe, and The Ritz-Carlton Reserve Dorado Beach.

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.

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $3.4 million, or 7.3%, to $50.8 million during the 2024 period compared to the 2023 period.

This increase is attributable to higher other hotel revenue of $4.5 million at 11 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.

These increases were partially offset by an aggregate decrease of approximately $1.0 million at Bardessono Hotel and Spa, Hilton La Jolla Torrey Pines, The Notary Hotel, The Ritz-Carlton Lake Tahoe, and The Ritz-Carlton Reserve Dorado Beach.

Rooms Expense .

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

Rooms expense increased $1.7 million, or 3.1%, to $55.7 million in the 2024 period compared to the 2023 period.

This increase is attributable to an aggregate increase in rooms expense of $2.5 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.

These increases were partially offset by an aggregate decrease of approximately $794,000 at the Cameo Beverly Hills, Hotel Yountville, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton Lake Tahoe, and The Ritz-Carlton St.

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.

Food and beverage expense increased $1.3 million, or 1.7%, to $77.4 million during the 2024 period compared to the 2023 period.

This increase is attributable to higher food and beverage expense of $3.3 million at 11 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.

These increases were partially offset by an aggregate decrease of approximately $2.0 million at Bardessono Hotel and Spa, Cameo Beverly Hills, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton Lake Tahoe and The Ritz-Carlton Reserve Dorado Beach.

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 decreased $361,000, or 0.3%, to $118.2 million in the 2024 period compared to the 2023 period.

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.

We experienced an increase of $589,000 in direct expenses and a decrease of $950,000 in indirect expenses and incentive management fees in the 2024 period compared to the 2023 period.

Direct expenses were 4.4% of total hotel revenue in the 2024 period and 4.3% in the 2023 period.

The increase in direct expenses is associated with higher direct expenses of approximately $814,000 at 11 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.

These increases were partially offset by lower direct expenses of $225,000 at the Cameo Beverly Hills, Capital Hilton, The Notary Hotel, The Ritz-Carlton Lake Tahoe and The Ritz-Carlton Reserve Dorado Beach.

The decrease in indirect expenses was attributable to lower:

(i) incentive management fees of $1.1 million;

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

(ii) general and administrative costs of $525,000;

(iii) lease expense of $468,000;

and (iv) energy costs of $519,000, partially offset by higher:

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

(i) repairs and maintenance of $1.2 million;

and (ii) $541,000 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.

Base management fees increased $459,000, or 3.6%, to $13.0 million in the 2024 period compared to the 2023 period.

Management fees increased $741,000 at nine hotel properties.

These increases were partially offset by an aggregate decrease of $282,000 at the Cameo Beverly Hills, Hotel Yountville, Park Hyatt Beaver Creek Resort & Spa, Pier House Resort & Spa, The Ritz-Carlton Lake Tahoe, The Ritz-Carlton Reserve Dorado Beach, and The Ritz-Carlton St.

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.

Property taxes, insurance and other increased $3.2 million, or 18.5%, to $20.8 million in the 2024 period compared to the 2023 period.

This increase is primarily attributable to an increase of $1.5 million at the Sofitel Chicago Magnificent Mile related to a property tax refund received in the 2023 quarter and an aggregate increase of $2.2 million at 13 hotel properties.

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

These increases were partially offset by an aggregate decrease of approximately $525,000 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.

Depreciation and amortization increased $5.0 million, or 11.1%, to $50.1 million for the 2024 period compared to the 2023 period.

This increase is comprised of an aggregate increase of $6.8 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.

These increases were partially offset by an aggregate decrease of $1.7 million 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.

Advisory services fee decreased $1.6 million, or 10.1%, to $14.5 million in the 2024 period compared to the 2023 period due to lower equity-based compensation of $2.8 million and base advisory fee of $644,000, partially offset by higher reimbursable expenses of $1.2 million and higher incentive fees of $648,000.

In the 2024 period, we recorded an advisory services fee of $14.5 million, which included a base advisory fee of $6.7 million, reimbursable expenses of $5.2 million, $2.0 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc, and incentive fees of $648,000.

In the 2023 period, we recorded an advisory services fee of $16.2 million, which included a base advisory fee of $7.3 million, reimbursable expenses of $4.1 million, and $4.8 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.

Corporate general and administrative expense was $2.2 million in the 2024 period compared to expense of $6.7 million in the 2023 period.

The decrease in corporate general and administrative expenses of $4.5 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 2024, lower miscellaneous expenses of $682,000, and lower public company costs of $312,000.

This decrease was partially offset by higher professional fees of $4.4 million.

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.

In the 2024 period and the 2023 period, we recorded equity in loss of unconsolidated entity of $134,000 and $148,000, 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 income was $1.9 million and $4.4 million in the 2024 period and the 2023 period, respectively.

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

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.

Interest expense and amortization of discounts and loan costs increased $7.3 million, or 15.7%, to $53.8 million for the 2024 period compared to the 2023 period.

The increase is primarily due to higher interest expense from higher average interest rates in the 2024 period.

The average SOFR rates for the 2024 period and the 2023 period were 5.33% and 4.62%, respectively.

LIBOR ceased to be published after June 30, 2023.

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

The average LIBOR rate for the 2023 period was 4.85%.

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.

Write-off of loan costs and exit fees was $803,000 in the 2024 period related to various loan refinances and modifications.

Write-off of loan costs and exit fees was $260,000 in the 2023 period related to related to various loan modifications.

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.

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.

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.

In the 2024 period, we recognized a loss of $22,000 attributable to the discount associated with the Cameo Beverly Hills mortgage loan that was repaid on April 9, 2024.

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.

Realized and unrealized gain on derivatives of $1.3 million for the 2024 period consisted of an unrealized gain on warrants of $12,000 and a realized gain of $3.2 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 $2.0 million.

Realized and unrealized gain on derivatives of $695,000 for the 2023 period consisted of unrealized gain on warrants of $119,000 and a realized gain of $4.1 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 $3.6 million.

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 tax expense decreased $916,000, from $2.3 million in the 2023 period to $1.3 million in the 2024 period.

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

(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.

Our noncontrolling interest partner in consolidated entities was allocated loss of $1.0 million and a loss of $58,000 in the 2024 period and the 2023 period, respectively.

At both June 30, 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.

Noncontrolling interests in operating partnership were allocated net income of $1.6 million in the 2024 period and a net loss of $664,000 in the 2023 period.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 8.02% and 6.63% as of June 30, 2024 and 2023, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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• 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.

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

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

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(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.

and (ii) 1/12 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.

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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%.

As of June 30, 2024, The Ritz-Carlton Lake Tahoe was in a cash trap, although there was no cash trapped for this mortgage loan.

As of June 30, 2024, the Company held cash and cash equivalents of $120.3 million and restricted cash of $60.7 million, inclusive amounts in assets held for sale, the vast majority of which is comprised of lender and manager-held reserves.

As of June 30, 2024, $17.1 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 June 30, 2024, our net debt to gross assets was 40.4%.

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

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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 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.

As of August 6, 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.

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

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

As of June 30, 2024, the Company has not repurchased any common stock pursuant to the plan.

Debt Transactions

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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%.

At the time, the hotel property remained encumbered by the original mortgage loan, which had been partially paid down to a remaining balance of $66.6 million.

The lender also provided a six-month extension.

The mortgage loan bore 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.

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

On July 17, 2024, the Company sold the Hilton La Jolla Torrey Pines hotel pursuant to an Agreement of Purchase and Sale, entered into effective May 6, 2024, for $165 million in cash, subject to customary pro-rations and adjustments.

The Company owned an indirect 75% equity interest in the hotel property.

Additionally, the Company repaid the $66.6 million mortgage loan secured by the hotel property.

On August 7, 2024, the Company closed on a refinancing involving five hotels.

The new loan totals $407 million and has a two-year initial term with three one-year extension options, subject to the satisfaction of certain conditions, taking the final maturity to 2029.

The loan is interest only and provides for a floating interest rate of SOFR + 3.24%.

As part of this financing, the Company acquired $42.2 million of the most junior tranche of the loan, which lowered its net spread on the $364.8 million remaining loan amount to SOFR + 3.01%.

The loan is secured by five hotels:

Pier House Resort & Spa, Bardessono Hotel & Spa, Hotel Yountville, The Ritz-Carlton Sarasota, and The Ritz-Carlton St.

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 had approximately $120.3 million (including amounts held for sale) and $85.6 million of cash and cash equivalents at June 30, 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.

Net cash flows provided by operating activities were $60.2 million and $62.0 million for the six months ended June 30, 2024 and 2023, respectively.

Cash flows from operations were impacted by changes in hotel operations.

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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.

For the six months ended June 30, 2024, net cash flows used in investing activities were $38.7 million.

These cash outflows were primarily attributable to $39.2 million of capital improvements made to various hotel properties partially offset by cash inflows of $542,000 related to proceeds from property insurance.

Our capital improvements consisted of approximately $28.6 million of return on investment capital projects and approximately $10.6 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.

For the six months ended June 30, 2023, net cash flows used in investing activities were $36.1 million.

These cash outflows were primarily attributable to $36.2 million of capital improvements made to various hotel properties and a $158,000 loan to OpenKey partially offset by cash inflows of $327,000 related to proceeds from property insurance.

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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.

For the six months ended June 30, 2024, net cash flows used in financing activities were $6.9 million.

Cash outflows primarily consisted of $30.0 million of repayments of indebtedness, $26.2 million of dividend and distribution payments, $1.3 million to purchase interest rate caps, $3.3 million of payments of loan costs and exit fees and $11.0 million for cash redemptions of Series E and Series M preferred stock.

These cash outflows were partially offset by cash inflows of $62.0 million from borrowings on indebtedness and $3.3 million of proceeds from in-the-money interest rate caps.

For the six months ended June 30, 2023, net cash flows used in financing activities were $150.1 million.

Cash outflows primarily consisted of repayments of indebtedness of $196.4 million, $26.1 million of dividend and distribution payments, $19.3 million of payments to repurchase common stock, payments of $7.2 million for the redemption of operating partnership units, $3.4 million to purchase interest rate caps, $2.0 million of distributions to a noncontrolling interest in consolidated entities and $904,000 for cash redemptions of Series E and Series M preferred stock.

These cash outflows were partially offset by cash inflows of $97.9 million from the issuance of preferred stock, $4.1 million of contributions from a noncontrolling interest in consolidated entities and $4.0 million of proceeds from in-the-money interest rate caps.

Dividend Policy.

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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.

On April 5, 2024, our board of directors declared a quarterly cash dividend of $0.05 per diluted share, for the second quarter of 2024.

On July 10, 2024, our board of directors declared a quarterly cash dividend of $0.05 per diluted share, for the third 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.

The board of directors 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.

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The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income (loss) $ (13,787) $ (3,138) $ 1,695 $ 13,466

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Legal, advisory and settlement costs 2,870 12 4,817 81

Advisory services incentive fee 648 — 648 —

(Gain) loss on extinguishment of debt 22 — 22 (2,318)

Company’s portion of adjustments to EBITDAre of OpenKey 3 — 3 —

Adjusted EBITDAre $ 42,686 $ 46,253 $ 108,878 $ 112,315

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The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income (loss) $ (13,787) $ (3,138) $ 1,695 $ 13,466

12 unchanged sentences

Deemed dividends on preferred stock

26 301 2,024 2,755

Transaction and conversion costs 53 1,056 (5,574) 2,251

5 unchanged sentences

Amortization of loan costs 1,319 661 2,527 1,400

Advisory services incentive fee 648 — 648 —

(Gain) loss on extinguishment of debt 22 — 22 (2,318)

Company’s portion of adjustments to FFO of OpenKey 3 — 3 —

Adjusted FFO available to common stockholders and OP unitholders $ 7,368 $ 14,398 $ 37,628 $ 46,527

2 unchanged sentences

The following table presents the amounts of the adjustments for noncontrolling interests for each line item:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Depreciation and amortization on real estate $ (998) $ (804) $ (2,238) $ (1,540)

36 unchanged sentences

The ground lease contains one extension option of either 10 or 20 years dependent upon capital investment during the lease term.

The hotel property was sold in July 2024 and the ground lease transferred to the buyer.

(6) The initial ground lease expires in 2065.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis