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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-08 · 230 added, 173 removed, 562 unchanged (42% of the section changed)

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.

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 one hotel held in a consolidated joint venture and is wholly owned by the joint venture and the U.S.

Virgin Islands’ (“USVI”) taxable REIT subsidiary that owns The Ritz-Carlton St.

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

As of June 30, 2024, we owned interests in 16 hotel properties in seven states, the District of Columbia, Puerto Rico and St.

As of September 30, 2024, we owned interests in 15 hotel properties in seven states, the District of Columbia, Puerto Rico and St.

Virgin Islands with 3,807 total rooms, or 3,667 net rooms, excluding those attributable to our joint venture partner.

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

We are advised by Ashford LLC through an advisory agreement.

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

As of June 30, 2024, Remington Hospitality , a subsidiary of Ashford Inc., managed four of our 16 hotel properties.

As of September 30, 2024, Remington Hospitality , a subsidiary of Ashford Inc., managed four of our 15 hotel properties.

Third-party management companies managed the remaining hotel properties.

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Archie Bennett, Jr.

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

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

The Bennetts owned approximately 809,937 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 4,316,632 shares of Ashford Inc.

common stock, which if converted as of June 30, 2024 would have increased the Bennetts’ ownership interest in Ashford Inc.

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

As of September 30, 2024, Mr.

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

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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.

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

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

• the repayment of all of its 2024 debt maturities;

• a $50 million preferred share redemption program;

• a $50 million common share repurchase authorization.

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

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

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

The board of 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.

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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.

The Agreement also provides for the voluntary dismissal, with prejudice, of the consolidated action previously 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”).

Pursuant to the Agreement, the Consolidated Litigation was voluntarily dismissed, with prejudice, on July 3, 2024.

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.

Additionally, pursuant to the Agreement, the Board was required to 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 was 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.

In accordance with the Cooperation Agreement, on October 4, 2024, the Board increased the number of directors of the Company from eight to nine and appointed Mr.

Shah as the Additional Board Member to serve until the Company’s next annual meeting of stockholders and until his successor is duly elected and qualified.

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.

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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.

As of November 6, 2024, the Company has loaned approximately $7.0 million that has been used to purchase approximately 3.0 million shares of Braemar common stock.

On July 17, 2024, we sold the Hilton La Jolla Torrey Pines 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.

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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%.

As part of this financing, the Company acquired a tranche of CMBS with a par value of $42.2 million and a rate of SOFR + 5.20%.

The loan is secured by five hotels:

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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”);

(i) From August 8, 2024 until the earlier of (a) November 15, 2025 and (b) 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;

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RESULTS OF OPERATIONS

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)

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

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

Three Months Ended September 30, Favorable (Unfavorable)

2024 2023 $ Change % Change

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Total expenses 166,279 159,150 (7,129) (4.5)

Gain (loss) on disposition of assets and hotel property

88,210 — 88,210

Operating income (loss) 70,329 651 69,678 10,703.2

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Interest income 2,660 986 1,674 169.8

Other income (expense) — 293 (293) (100.0)

Interest expense and amortization of loan costs (27,911) (23,306) (4,605) (19.8)

Write-off of loan costs and exit fees (5,292) (2,588) (2,704) (104.5)

Gain (loss) on extinguishment of debt

Realized and unrealized gain (loss) on derivatives (735) 223 (958) (429.6)

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Net income (loss) attributable to the Company $ 12,596 $ (22,030) $ 34,626 157.2 %

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

Three Months Ended June 30,

All hotel properties owned for the three months ended September 30, 2024 and 2023 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended September 30, 2024 and 2023.

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

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

Hotel Property Location Type Date

Hilton La Jolla Torrey Pines

La Jolla, California

July 17, 2024

The following table illustrates the key performance indicators of all hotel properties that were included in our results of operations during the three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

Occupancy 68.50 % 68.37 %

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Total hotel revenue (in thousands) $ 148,398 $ 159,801

The following table illustrates the key performance indicators of the 15 hotel properties that were owned for the full three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

Occupancy 68.22 % 66.72 %

ADR (average daily rate) $ 378.80 $ 393.48

RevPAR (revenue per available room) $ 258.41 $ 262.54

Rooms revenue (in thousands) $ 91,053 $ 92,290

Total hotel revenue (in thousands) $ 146,349 $ 146,114

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.

Net income (loss) attributable to the Company changed $34.6 million, from a net loss of $22.0 million for the three months ended September 30, 2023 (the “2023 quarter”) to net income of $12.6 million for the three months ended September 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.

Rooms revenue decreased $8.3 million, or 8.3%, to $92.4 million during the 2024 quarter compared to the 2023 quarter.

During the 2024 quarter, we experienced a 13 basis point increase in occupancy and a 1.0% decrease in room rates.

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The Ritz-Carlton St.

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

(1,578) (524) (11.4) %

Park Hyatt Beaver Creek Resort & Spa 125 252 (0.9) %

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The Ritz-Carlton Sarasota (2)

(31) 434 (6.7) %

Hilton La Jolla Torrey Pines 590 385 3.3 %

Bardessono Hotel and Spa (532) (651) (2.3) %

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Total $ (1,237) 150 (3.7) %

Non Comparable

Hilton La Jolla Torrey Pines (7,074) (3) (6.4) %

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

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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.

Food and beverage revenue decreased $3.8 million, or 9.7%, to $34.8 million during the 2024 quarter compared to the 2023 quarter.

This decrease is attributable to a decrease of $1.9 million at nine comparable hotel properties and a decrease of $3.2 million at the Hilton La Jolla Torrey Pines as a result of its sale on July 17, 2024.

These decreases were partially offset by an aggregate increase of $1.3 million at The Ritz-Carlton St.

Thomas, The Notary Hotel, Marriott Seattle Waterfront, Sofitel Chicago Magnificent Mile, Pier House Resort & Spa and Hotel Yountville.

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.

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $664,000, or 3.2%, to $21.2 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 11 comparable hotel properties, partially offset by an aggregate decrease of $583,000 at The Ritz-Carlton Reserve Dorado Beach, The Ritz-Carlton St.

Thomas, Park Hyatt Beaver Creek Resort & Spa, and Pier House Resort & Spa, as well as a decrease of $1.4 million at Hilton La Jolla Torrey Pines.

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.

Rooms expense decreased $351,000, or 1.4%, to $25.5 million in the 2024 quarter compared to the 2023 quarter.

This decrease is primarily attributable to an aggregate decrease of $665,000 at five comparable hotel properties as well as a decrease of $1.1 million at Hilton La Jolla Torrey Pines, partially offset by an aggregate increase of $1.4 million at The Ritz-Carlton Lake Tahoe, Capital Hilton, Marriott Seattle Waterfront, The Notary Hotel, Sofitel Chicago Magnificent Mile, Park Hyatt Beaver Creek Resort & Spa, The Ritz-Carlton St.

Thomas, Cameo Beverly Hills, Four Seasons Resort Scottsdale, and Pier House Resort & Spa.

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.

Food and beverage expense decreased $752,000, or 2.3%, to $32.0 million during the 2024 quarter compared to the 2023 quarter.

This decrease is attributable to an aggregate decrease of $306,000 at six comparable hotel properties as well as a decrease of $1.7 million at Hilton La Jolla Torrey Pines, partially offset by an aggregate increase of $1.2 million at the Marriott Seattle Waterfront, The Ritz-Carlton St.

Thomas, Capital Hilton, The Ritz-Carlton Sarasota, Sofitel Chicago Magnificent Mile, Park Hyatt Beaver Creek Resort & Spa, The Notary Hotel, The Clancy, and Pier House Resort & Spa.

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.

Other operating expenses decreased $1.4 million, or 2.7%, to $51.3 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.

We experienced an increase of $219,000 in direct expenses and a decrease of $1.6 million in indirect expenses and incentive management fees in the 2024 quarter as compared to the 2023 quarter.

Direct expenses were 4.9% of total hotel revenue in the 2024 quarter and 4.4% 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.

The decrease in indirect expenses comprises decreases in:

(i) general and administrative costs of $540,000 comprising an aggregate increase of $71,000 at our 15 comparable hotel properties and a decrease of $611,000 at the one disposed hotel property;

(ii) repairs and maintenance of $109,000 comprising an aggregate increase of $147,000 at our 15 comparable hotel properties and a decrease of $256,000 at the one disposed hotel property;

(iii) lease expense of $903,000 comprising an aggregate increase of $60,000 at our 15 comparable hotel properties and a decrease of $963,000 at the one disposed hotel property;

(iv) incentive management fees of $252,000 comprising an aggregate decrease of $140,000 at our 15 comparable hotel properties and a decrease of $112,000 at the one disposed hotel property;

and (v) energy costs of $293,000 comprising an aggregate increase of $185,000 at our 15 comparable hotel properties and a decrease of $478,000 at the one disposed hotel property.

The decreases were partially offset by an increase in marketing costs of $448,000 comprising an aggregate increase of $1.0 million at our 15 comparable hotel properties and a decrease of $600,000 at the one disposed hotel property.

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.

Base management fees decreased $207,000, or 4.1%, to $4.9 million in the 2024 quarter compared to the 2023 quarter.

Base management fees decreased by $249,000 at seven comparable hotel properties and by $349,000 at the one disposed hotel property.

These decreases were partially offset by an aggregate increase of $391,000 at The Notary Hotel, Capital Hilton, Marriott Seattle Waterfront, Sofitel Chicago Magnificent Mile, The Ritz-Carlton Sarasota, Four Seasons Resort Scottsdale, and Park Hyatt Beaver Creek Resort & Spa.

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.

Property taxes, insurance and other decreased $486,000, or 4.6%, to $10.0 million in the 2024 quarter compared to the 2023 quarter.

The decrease is primarily attributable to an aggregate decrease of approximately $1.1 million at eight comparable hotel properties as well as a decrease of $634,000 at the one disposed hotel property.

These increases were partially offset by an aggregate increase of approximately $1.2 million primarily at the Sofitel Chicago Magnificent Mile, The Clancy, Cameo Beverly Hills, Marriott Seattle Waterfront, Four Seasons Resort Scottsdale, Capital Hilton, and Hotel Yountville.

Depreciation and Amortization .

Depreciation and amortization increased $2.4 million, or 10.5%, to $25.1 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.

There was an aggregate increase of $4.3 million at 12 comparable hotel properties, partially offset by an aggregate decrease of $1.0 million at The Notary Hotel, The Clancy, and Pier House Resort & Spa, primarily due to fully depreciated assets, as well as a decrease of $873,000 at the one disposed hotel property.

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.

Advisory services fee increased $1.6 million, or 22.9%, to $8.6 million in the 2024 quarter compared to the 2023 quarter due to increases of $1.5 million in the incentive fee, $1.2 million in reimbursable expenses, and $112,000 in the base advisory fee, partially offset by a decrease of $1.2 million in equity-based compensation.

In the 2024 quarter, we recorded an advisory services fee of $8.6 million, which included a base advisory fee of $3.5 million, reimbursable expenses of $3.2 million, incentive fee of $1.5 million and equity-based compensation of $427,000.

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

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Corporate general and administrative expense was $8.9 million in the 2024 quarter as compared to $2.5 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.

The increase in corporate general and administrative expense is due to increases of professional fees of $776,000, miscellaneous expenses of $415,000, public company costs of $97,000 and reimbursed legal costs of $6.0 million recorded in the 2024 quarter, partially offset by a decrease of reimbursed operating expenses of Ashford Securities of $921,000.

Gain (loss) on disposition of assets and hotel property .

In the 2024 quarter, we recorded a gain of approximately $88.2 million related to the sale of Hilton La Jolla Torrey Pines.

There was no such gain (loss) recorded for 2023 quarter.

Equity in Earnings (Loss) of Unconsolidated Entity .

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Interest income was $2.7 million and $1.0 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.

The increase in interest income in the 2024 quarter was primarily attributable to higher cash balances in the 2024 quarter compared to the 2023 quarter as well as interest income associated with a tranche of CMBS included in investment in securities.

Other Income (Expense).

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

Interest Expense and Amortization of Loan Costs .

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The average SOFR rates for the 2024 quarter and the 2023 quarter were 5.17% and 5.08%, 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.

Write-off of loan costs and exit fees was $5.3 million in the 2024 quarter, primarily related to various loan refinances and modifications.

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

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.

Realized and unrealized loss on derivatives of $735,000 for 2024 quarter consisted of an unrealized loss on interest rate caps of approximately $1.7 million, partially offset by a realized gain of $1.0 million associated with payments received from counterparties on in-the-money interest rate caps.

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

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

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 tax benefit decreased $326,000, from $1.2 million in the 2023 quarter to $864,000 in the 2024 quarter.

This decrease was primarily due to an increase in the valuation allowance on certain of our TRS deferred tax assets 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.

Our noncontrolling interest partner in consolidated entities was allocated income of $27.4 million and $1.8 million in the 2024 quarter and the 2023 quarter, respectively.

The allocated income for the 2024 quarter includes our partner’s share of gain on the sale of the Hilton La Jolla Torrey Pines.

At September 30, 2024, noncontrolling interest in consolidated entities represented an ownership interest of 25% in one hotel property held by one entity.

At September 30, 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)

Noncontrolling interests in operating partnership were allocated a net loss of $124,000 and $2.4 million in the 2024 quarter and the 2023 quarter, respectively.

Redeemable noncontrolling interests in Braemar OP represented ownership interests of 8.05% and 6.63% as of September 30, 2024 and 2023, respectively.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

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

Nine Months Ended September 30, Favorable (Unfavorable)

2024 2023 $ Change % Change

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Total expenses 518,303 505,973 (12,330) (2.4)

Gain (loss) on disposition of assets and hotel property

88,210 — 88,210

Operating income (loss) 124,971 55,836 69,135 123.8

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Interest income 4,528 5,389 (861) (16.0)

Other income (expense) — 293 (293) (100.0)

Interest expense and amortization of discounts and loan costs (81,687) (69,779) (11,908) (17.1)

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Net income (loss) attributable to the Company $ 16,960 $ (7,842) $ 24,802 316.3 %

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

Six Months Ended June 30,

All hotel properties owned for the nine months ended September 30, 2024 and 2023 have been included in our results of operations during the respective periods in which they were owned.

Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the nine months ended September 30, 2024 and 2023.

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

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

Hotel Property Location Type Date

Hilton La Jolla Torrey Pines

La Jolla, California

July 17, 2024

The following table illustrates the key performance indicators of all hotel properties that were included in our results of operations during the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

Occupancy 68.91 % 68.06 %

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Total hotel revenue (in thousands) $ 555,064 $ 561,809

The following table illustrates the key performance indicators of the 15 hotel properties that were owned for the full nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

Occupancy 68.16 % 66.77 %

ADR (average daily rate) $ 463.81 $ 478.22

RevPAR (revenue per available room) $ 316.13 $ 319.31

Rooms revenue (in thousands) $ 331,705 $ 333,050

Total hotel revenue (in thousands) $ 527,163 $ 523,840

Net Income Attributable to the Company.

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.

Net income (loss) attributable to the Company changed $24.8 million from a net loss of $7.8 million for the nine months ended September 30, 2023 (the “2023 period”) to net income of $17.0 million for the nine months ended September 30, 2024 (the “2024 period”), as a result of the factors discussed below.

Rooms Revenue .

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

Rooms revenue decreased $8.2 million to $347.2 million during the 2024 period compared to the 2023 period.

During the 2024 period, we experienced a 85 basis point increase in occupancy and a decrease of 1.5% in room rates compared to the 2023 period.

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769 285 (2.1) %

Hilton La Jolla Torrey Pines 223 — 1.1 %

Bardessono Hotel and Spa (1)

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Total $ (1,345) 139 (3.0) %

Non-comparable

Hilton La Jolla Torrey Pines (6,851) (148) (2.6) %

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

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Food and Beverage Revenue .

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.

Food and beverage revenue decreased $2.7 million, or 1.9%, to $135.9 million during the 2024 period compared to the 2023 period.

We experienced an aggregate decrease in food and beverage revenue of $6.1 million at seven comparable hotel properties as well as a decrease of $1.7 million at Hilton La Jolla Torrey Pines.

These decreases were partially offset by an aggregate increase of approximately $5.2 million at Four Seasons Resort Scottsdale, The Ritz-Carlton St.

Thomas, The Notary Hotel, Sofitel Chicago Magnificent Mile, Marriott Seattle Waterfront, The Clancy, Hotel Yountville, and Pier House Resort & Spa.

Other Hotel Revenue .

Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $4.1 million, or 6.0%, to $72.0 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 $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.

This increase is attributable to higher other hotel revenue of $6.8 million at 12 comparable hotel properties.

These increases were partially offset by an aggregate decrease of approximately $1.3 million at The Ritz-Carlton Reserve Dorado Beach, The Ritz-Carlton Lake Tahoe, and The Ritz-Carlton St.

Thomas, as well as a decrease of $1.5 million at Hilton La Jolla Torrey Pines.

Rooms Expense .

Rooms expense increased $1.3 million, or 1.7%, to $81.3 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 $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.

This increase is attributable to an aggregate increase in rooms expense of $2.9 million at nine comparable hotel properties.

These increases were partially offset by an aggregate decrease of approximately $669,000 at the Hotel Yountville, The Ritz-Carlton St.

Thomas, The Clancy, Park Hyatt Beaver Creek Resort & Spa, Bardessono Hotel and Spa, and Cameo Beverly Hills, as well as a decrease of $951,000 at Hilton La Jolla Torrey Pines.

Food and Beverage Expense .

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 $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.

Food and beverage expense increased $525,000, or 0.5%, to $109.4 million during the 2024 period compared to the 2023 period.

This increase is attributable to higher food and beverage expense of $3.9 million at ten comparable hotel properties.

These increases were partially offset by an aggregate decrease of approximately $2.2 million at The Ritz-Carlton Lake Tahoe, Cameo Beverly Hills, Bardessono Hotel and Spa, Park Hyatt Beaver Creek Resort & Spa, and The Ritz-Carlton Reserve Dorado Beach, as well as a decrease of $1.2 million at Hilton La Jolla Torrey Pines.

Other Operating Expenses .

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 decreased $1.8 million, or 1.0%, to $169.5 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 $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.

We experienced an increase of $808,000 in direct expenses and a decrease of $2.6 million in indirect expenses and incentive management fees in the 2024 period compared to the 2023 period.

Direct expenses were 4.5% 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 $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 $525,000;

(iii) lease expense of $468,000;

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

(i) repairs and maintenance of $1.2 million;

and (ii) $541,000 in marketing costs.

The increase in direct expenses is associated with higher direct expenses of approximately $1.5 million at eight comparable hotel properties.

These increases were partially offset by lower direct expenses of $434,000 at The Ritz-Carlton Reserve Dorado Beach, The Ritz-Carlton Lake Tahoe, Cameo Beverly Hills, Hotel Yountville, The Clancy, The Notary Hotel, and Capital Hilton, as well as $238,000 at Hilton La Jolla Torrey Pines.

The decrease in indirect expenses comprises decreases in:

(i) incentive management fees of $1.4 million comprising an aggregate decrease of $1.4 million at our 15 comparable hotel properties and an increase of $3,000 at the one disposed hotel property;

(ii) lease expense of $1.4 million comprising an aggregate decrease of $35,000 at our 15 comparable hotel properties and a decrease of $1.3 million at the one disposed hotel property;

(iii) general and administrative costs of $1.1 million comprising an aggregate decrease of $536,000 at our 15 comparable hotel properties and a decrease of $529,000 at the one disposed hotel property;

and (iv) energy costs of $812,000 comprising an aggregate decrease of $318,000 at our 15 comparable hotel properties and a decrease of $494,000 at the one disposed hotel property.

These decreases were partially offset by increases in:

(i) repairs and maintenance of $1.0 million comprising an aggregate increase of $1.2 million at our 15 comparable hotel properties and a decrease of $206,000 at the one disposed hotel property;

and (ii) marketing costs of $989,000 comprising an aggregate increase of $1.6 million at our 15 comparable hotel properties and a decrease of $583,000 at the one disposed hotel property.

Management Fees .

Base management fees increased $252,000, or 1.4%, to $17.9 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.

Management fees increased $1.0 million at six comparable hotel properties.

These increases were partially offset by an aggregate decrease of $486,000 at The Ritz-Carlton Lake Tahoe, Cameo Beverly Hills, The Ritz-Carlton Reserve Dorado Beach, The Ritz-Carlton St.

Thomas, Bardessono Hotel and Spa, The Clancy, Pier House Resort & Spa, Park Hyatt Beaver Creek Resort & Spa, and Hotel Yountville, as well as a decrease of $302,000 at Hilton La Jolla Torrey Pines.

Property Taxes, Insurance and Other .

Property taxes, insurance and other increased $2.8 million, or 9.9%, to $30.7 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 $525,000 at two hotel properties.

This increase is primarily attributable to an increase of $2.4 million at the Sofitel Chicago Magnificent Mile related to a property tax refund received in the 2023 quarter and an aggregate increase of

$2.6 million at 12 hotel properties.

These increases were partially offset by an aggregate decrease of approximately $1.8 million at two hotel properties, as well as a decrease of $417,000 at Hilton La Jolla Torrey Pines.

Depreciation and Amortization .

Depreciation and amortization increased $7.4 million, or 10.9%, to $75.2 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 $1.7 million at Sofitel Chicago Magnificent Mile, The Clancy, The Notary Hotel, and Pier House Resort & Spa, primarily due to fully depreciated assets.

This increase is comprised of an aggregate increase of $11.0 million at 11 comparable hotel properties.

These increases were partially offset by an aggregate decrease of $2.8 million at The Notary Hotel, The Clancy, Pier House Resort & Spa, and Sofitel Chicago Magnificent Mile, primarily due to fully depreciated assets, as well as a decrease of $795,000 at Hilton La Jolla Torrey Pines.

Advisory Services Fee.

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.

Advisory services fee decreased $28,000, or 0.1%, to $23.2 million in the 2024 period compared to the 2023 period due to lower equity-based compensation of $4.0 million and base advisory fee of $532,000, partially offset by higher reimbursable expenses of $2.4 million and a higher incentive fee of $2.1 million.

In the 2024 period, we recorded an advisory services fee of $23.2 million, which included a base advisory fee of $10.2 million, reimbursable expenses of $8.5 million, $2.4 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

and an incentive fee of $2.1 million.

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

Corporate General and Administrative .

Corporate general and administrative expense was $11.1 million in the 2024 period compared to expense of $9.2 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.

The increase in corporate general and administrative expenses is primarily attributable to higher professional fees of $5.1 million and $6.0 million of reimbursed legal costs in the 2024 period.

These increases were partially offset by lower miscellaneous expenses of $268,000, lower public company costs of $215,000.

and lower reimbursed operating expenses of Ashford Securities of $8.8 million.

The decrease in Ashford Securities reimbursed operations expenses was related 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 credit to expense in 2024.

Gain (loss) on disposition of assets and hotel property .

In the 2024 period, we recorded a gain of approximately $88.2 million related to the sale of Hilton La Jolla Torrey Pines.

There was no such gain (loss) recorded for the 2023 period.

Equity in Earnings (Loss) of Unconsolidated Entity .

In the 2024 period and the 2023 period, we recorded equity in loss of unconsolidated entity of $214,000 and $208,000, respectively, related to our investment in OpenKey.

Other Income (Expense).

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

Interest Income .

Interest income was $4.5 million and $5.4 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.

The decrease in interest income in the 2024 period was primarily attributable to lower average excess cash balances in the 2024 period compared to the 2023 period, partially offset by interest income associated with a tranche of CMBS included in investment in securities.

Interest Expense and Amortization of Discounts and Loan Costs .

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The average SOFR rates for the 2024 period and the 2023 period were 5.27% and 4.78%, respectively.

LIBOR ceased to be published after June 30, 2023.

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 $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.

Write-off of loan costs and exit fees was $6.1 million in the 2024 period related to various loan refinances and modifications.

Write-off of loan costs and exit fees was $2.8 million in the 2023 period related to related to various loan modifications.

Gain (loss) on Extinguishment of Debt.

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.

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.

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 $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 $523,000 for the 2024 period consisted of an unrealized gain on warrants of $12,000 and a realized gain of $4.2 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 $3.7 million.

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

1 unchanged sentence

Income Tax (Expense) Benefit .

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

Income tax expense decreased $590,000, from $1.1 million in the 2023 period to $474,000 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 $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.

Our noncontrolling interest partner in consolidated entities was allocated income of $26.3 million and $1.7 million in the 2024 period and the 2023 period, respectively.

The allocated income for the 2024 period includes our partner’s share of gain on the sale of the Hilton La Jolla Torrey Pines.

At September 30, 2024, noncontrolling interest in consolidated entities represented an ownership interest of 25% in one hotel property held by one entity.

At September 30, 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 $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.

Noncontrolling interests in operating partnership were allocated a net loss of $1.7 million in the 2024 period and $3.0 million in the 2023 period.

Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 8.05% and 6.63% as of September 30, 2024 and 2023, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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(i) 90% of the base fee paid for the same month in the prior fiscal year;

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.

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.

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

The success of our business strategy will

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

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

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

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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.

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.

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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 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%.

As of September 30, 2024, the mortgage loan secured by The Ritz-Carlton Lake Tahoe was in a cash trap.

The amount of cash in the cash trap as of September 30, 2024 was $0.

As of September 30, 2024, the Company held cash and cash equivalents of $168.7 million and restricted cash of $48.5 million, the vast majority of which is comprised of lender and manager-held reserves.

As of September 30, 2024, $19.9 million was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs.

At September 30, 2024, our net debt to gross assets was 41.0%.

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 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.

As of November 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.

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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.

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

Debt Transactions

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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.

On July 17, 2024, the Company sold the Hilton La Jolla Torrey Pines 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.

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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%.

As part of this financing, the Company acquired a tranche of CMBS with a par value of $42.2 million and a rate of SOFR + 5.20%.

The loan is secured by five hotels:

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Sources and Uses of Cash

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 had approximately $168.7 million and $85.6 million of cash and cash equivalents at September 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 $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.

Net cash flows provided by operating activities were $60.2 million and $73.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Cash flows from operations were impacted by changes in hotel operations and the disposition of a hotel property.

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 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.

For the nine months ended September 30, 2024, net cash flows provided by investing activities were $52.7 million.

The cash inflows were primarily attributable to $155.6 million from the

sale of Hilton La Jolla Torrey Pines, partially offset by cash outflows of $42.3 million from the purchase of securities, $54.8 million of capital improvements made to various hotel properties, $5.8 million from the issuance of a note receivable and a $79,000 loan to OpenKey.

Our capital improvements consisted of approximately $39.3 million of return on investment capital projects and approximately $15.5 million of renewal and replacement capital projects.

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

For the nine months ended September 30, 2023, net cash flows used in investing activities were $55.6 million.

These cash outflows were primarily attributable to $55.6 million of capital improvements made to various hotel properties and a $237,000 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 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.

For the nine months ended September 30, 2024, net cash flows used in financing activities were $62.2 million.

Cash outflows primarily consisted of $184.1 million of repayments of indebtedness, $39.0 million of dividend and distribution payments, $1.3 million to purchase interest rate caps, $15.4 million of payments of loan costs and exit fees, $27.0 million distributions to noncontrolling interest in consolidated entities, and $36.3 million for cash redemptions of Series E and Series M preferred stock.

These cash outflows were partially offset by cash inflows of $234.0 million from borrowings on indebtedness, $4.4 million of proceeds from in-the-money interest rate caps and $3.0 million of contributions from noncontrolling interest in consolidated entities.

For the nine months ended September 30, 2023, net cash flows used in financing activities were $126.3 million.

Cash outflows primarily consisted of repayments of indebtedness of $390.2 million, $39.4 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, $4.0 million to purchase interest rate caps, $2.0 million of distributions to a noncontrolling interest in consolidated entities, $3.3 million payments of loan costs and exit fees, and $4.8 million for cash redemptions of Series E and Series M preferred stock.

These cash outflows were partially offset by cash inflows of $236.0 million from borrowings on indebtedness, $97.9 million from the issuance of preferred stock, $4.1 million of contributions from a noncontrolling interest in consolidated entities and $6.0 million of proceeds from in-the-money interest rate caps.

Dividend Policy

1 unchanged sentence

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 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.

On October 3, 2024, our board of directors declared a quarterly cash dividend of $0.05 per diluted share, for the fourth 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.

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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.

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.

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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.

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

We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable) contract assets (liabilities), transaction and conversion costs, 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.

5 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

5 unchanged sentences

Company’s portion of EBITDA of OpenKey (76) (63) (215) (220)

EBITDA and EBITDAre

91,964 22,205 198,882 129,477

(Gain) loss on disposition of assets and hotel property

(88,210) — (88,210) —

EBITDAre 3,754 22,205 110,672 129,477

Amortization of favorable (unfavorable) contract assets (liabilities) 109 119 346 356

6 unchanged sentences

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

Other (income) expense

— (293) — (293)

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

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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.

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, severance, 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.

9 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

10 unchanged sentences

Equity in (earnings) loss of unconsolidated entity 80 60 214 208

(Gain) loss on disposition of assets and hotel property (1)

(61,970) — (61,970) —

Company’s portion of FFO of OpenKey (91) (71) (253) (234)

9 unchanged sentences

Amortization of loan costs (1)

1,741 858 4,268 2,258

Advisory services incentive fee 1,464 — 2,112 —

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

Other (income) expense

— (293) — (293)

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

3 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

1 unchanged sentence

Amortization of loan costs (38) (23) (273) (70)

The following table presents certain information related to our hotel properties:

Gain (loss) on disposition of assets and hotel property

26,240 — 26,240 —

The following table presents certain information related to our hotel properties as of September 30, 2024:

Hotel Property Location Total Rooms % Owned Owned Rooms

18 unchanged sentences

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

Ground Lease Property (4)

Bardessono Hotel and Spa (5)

7 unchanged sentences

(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.

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

(4) Some of our hotel properties are on land subject to ground leases, one of which covers the entire property.

(5) 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