Braemar Hotels & Resorts Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm ( BDO USA, P.C. ; Dallas, Texas ; PCAOB ID # 243 ) 106 Consolidated Balance Sheets — December 31, 2024 and 2023 108 Consolidated Statements of Operations — Years Ended December 31, 2024, 2023 and 2022 109 Consolidated Statements of Comprehensive Income (Loss) — Years Ended December 31, 2024, 2023 and 2022 110 Consolidated Statements of Equity — Years Ended December 31, 2024, 2023 and 2022 111 Consolidated Statements of Cash Flows — Years Ended December 31, 2024, 2023 and 2022 113 Notes to Consolidated Financial Statements 115 105 Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors Braemar Hotels & Resorts Inc. Dallas, Texas Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Braemar Hotels & Resorts Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and schedule listed in the index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 , in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 12, 2025 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Presentation of Commercial Mortgage-Backed Security As described in Note 7 to the Company’s consolidated financial statements, on August 7, 2024, the Company refinanced two existing mortgage loans and a credit facility into a new $407 million mortgage loan. The Company also purchased an investment in a tranche of Commercial Mortgage-Backed Securities (“CMBS”), which is secured by the five hotel properties which secure the $407 million mortgage loan. The CMBS has a par value of $42.2 million and a rate of SOFR + 5.20%. We identified the presentation of the mortgage loan, investment in the CMBS, as well as the corresponding interest expense and interest income, as a critical audit matter. Auditing the presentation of the CMBS and related mortgage loan was especially challenging due to the inherent complexities of the agreements and relevant accounting literature. Auditing the presentation 106 required an increased level of audit effort, including involvement of professionals with expertise in the relevant technical accounting literature. The primary procedures we performed to address the critical audit matter included: • Inspecting the underlying agreements for the CMBS and mortgage loan to understand the relevant terms. • Utilizing personnel with expertise in the relevant technical accounting literature to evaluate the appropriate presentation of the mortgage loan, investment in the CMBS, interest expense and interest income. /s/ BDO USA, P.C. We have served as the Company’s auditor since 2015. Dallas, Texas March 12, 2025 107 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ( in thousands, except share and per share amounts) December 31, 2024 December 31, 2023 ASSETS Investments in hotel properties, gross $ 2,252,574 $ 2,382,716 Accumulated depreciation ( 473,888 ) ( 498,508 ) Investments in hotel properties, net 1,778,686 1,884,208 Cash and cash equivalents 135,465 85,599 Restricted cash 49,592 80,904 Investment in securities (amortized cost of $ 42,279 ) 41,535 — Accounts receivable, net of allowance of $ 459 and $ 237 , respectively 31,754 39,199 Inventories 4,664 5,003 Note receivable 8,283 — Prepaid expenses 5,116 9,938 Deferred costs, net 75 75 Investment in unconsolidated entity 145 1,674 Derivative assets 356 2,847 Operating lease right-of-use assets 34,852 78,383 Other assets 19,538 17,751 Intangible assets, net 3,125 3,504 Due from third-party hotel managers 22,873 17,739 Total assets $ 2,136,059 $ 2,226,824 LIABILITIES AND EQUITY Liabilities: Indebtedness, net $ 1,210,018 $ 1,162,444 Accounts payable and accrued expenses 143,566 149,867 Dividends and distributions payable 9,255 9,158 Due to Ashford Inc. 4,267 1,471 Due to related parties, net 1,055 603 Due to third-party hotel managers 1,476 1,608 Operating lease liabilities 19,984 60,379 Other liabilities 24,268 22,756 Derivative liabilities — 12 Total liabilities 1,413,889 1,408,298 Commitments and contingencies (note 18) 5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,078,017 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 65,426 65,426 Series E redeemable preferred stock, $ 0.01 par value, 14,910,521 and 16,316,315 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 352,502 377,035 Series M redeemable preferred stock, $ 0.01 par value, 1,476,621 and 1,832,805 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 36,916 45,623 Redeemable noncontrolling interests in operating partnership 29,964 32,395 Equity: Preferred stock, $ 0.01 par value, 80,000,000 shares authorized: 8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at December 31, 2024 and December 31, 2023 16 16 Common stock, $ 0.01 par value, 250,000,000 shares authorized, 66,607,823 and 66,636,353 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 665 666 Additional paid-in capital 718,536 718,498 Accumulated other comprehensive income (loss) ( 684 ) — Accumulated deficit ( 477,804 ) ( 412,199 ) Total stockholders’ equity of the Company 240,729 306,981 Noncontrolling interest in consolidated entities ( 3,367 ) ( 8,934 ) Total equity 237,362 298,047 Total liabilities and equity $ 2,136,059 $ 2,226,824 See Notes to Consolidated Financial Statements. 108 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 2024 2023 2022 REVENUE Rooms $ 452,361 $ 464,899 $ 431,515 Food and beverage 181,250 185,331 159,241 Other 94,793 89,113 78,829 Total hotel revenue 728,404 739,343 669,585 EXPENSES Hotel operating expenses: Rooms 106,465 105,439 94,410 Food and beverage 145,901 144,544 125,555 Other expenses 225,864 227,913 205,373 Management fees 23,500 23,261 20,149 Total hotel operating expenses 501,730 501,157 445,487 Property taxes, insurance and other 42,508 38,629 30,766 Depreciation and amortization 98,733 93,272 78,122 Advisory services fee 30,487 31,089 28,847 (Gain) loss on legal settlements — — ( 114 ) Corporate general and administrative 14,361 13,523 18,084 Total operating expenses 687,819 677,670 601,192 Gain (loss) on disposition of assets and hotel property 88,165 — — OPERATING INCOME (LOSS) 128,750 61,673 68,393 Equity in earnings (loss) of unconsolidated entity ( 1,608 ) ( 253 ) ( 328 ) Interest income 7,135 6,401 2,677 Other income (expense) — 293 — Interest expense and amortization of discounts and loan costs ( 108,124 ) ( 94,219 ) ( 52,166 ) Write-off of loan costs and exit fees ( 6,111 ) ( 3,489 ) ( 146 ) Gain (loss) on extinguishment of debt ( 22 ) 2,318 — Realized and unrealized gain (loss) on derivatives 585 ( 663 ) 4,961 INCOME (LOSS) BEFORE INCOME TAXES 20,605 ( 27,939 ) 23,391 Income tax (expense) benefit ( 842 ) ( 2,689 ) ( 4,043 ) NET INCOME (LOSS) 19,763 ( 30,628 ) 19,348 (Income) loss attributable to noncontrolling interest in consolidated entities ( 25,928 ) ( 1,619 ) ( 2,063 ) Net (income) loss attributable to redeemable noncontrolling interests in operating partnership 4,472 5,230 476 NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY ( 1,693 ) ( 27,017 ) 17,761 Preferred dividends ( 40,295 ) ( 42,304 ) ( 21,503 ) Deemed dividends on preferred stock ( 8,958 ) ( 4,719 ) ( 6,954 ) NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ ( 50,946 ) $ ( 74,040 ) $ ( 10,696 ) INCOME (LOSS) PER SHARE - BASIC: Net income (loss) attributable to common stockholders $ ( 0.77 ) $ ( 1.13 ) $ ( 0.15 ) Weighted average common shares outstanding – basic 66,500 65,989 69,687 INCOME (LOSS) PER SHARE - DILUTED: Net income (loss) attributable to common stockholders $ ( 0.77 ) $ ( 1.13 ) $ ( 0.15 ) Weighted average common shares outstanding – diluted 66,500 65,989 69,687 See Notes to Consolidated Financial Statements. 109 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year Ended December 31, 2024 2023 2022 NET INCOME (LOSS) $ 19,763 $ ( 30,628 ) $ 19,348 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: Unrealized gain (loss) on investment in securities ( 744 ) — — Total other comprehensive income (loss) ( 744 ) — — TOTAL COMPREHENSIVE INCOME (LOSS) 19,019 ( 30,628 ) 19,348 Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities ( 25,928 ) ( 1,619 ) ( 2,063 ) Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership 4,532 5,230 476 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY $ ( 2,377 ) $ ( 27,017 ) $ 17,761 See Notes to Consolidated Financial Statements. 110 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (in thousands except per share amounts) 8.25 % Series D Cumulative Preferred Stock Accumulated Other Comprehensive Income/(loss) Noncontrolling Interests in Consolidated Entities Total 5.50 % Series B Cumulative Convertible Preferred Stock Series E Redeemable Preferred Stock Series M Redeemable Preferred Stock Redeemable Noncontrolling Interest in Operating Partnership Common Stock Additional Paid-in Capital Accumulated Deficit Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31, 2021 1,600 $ 16 65,365 $ 653 $ 707,418 $ ( 309,240 ) $ — $ ( 16,549 ) $ 382,298 3,078 $ 65,426 1,710 $ 39,339 29 $ 715 $ 36,087 Purchase of common stock — — ( 1,773 ) ( 17 ) ( 7,448 ) — — — ( 7,465 ) — — — — — — — Impact of adoption of new accounting standard — — — — ( 6,257 ) 656 — — ( 5,601 ) — — — — — — — Equity-based compensation — — — — 5,475 — — — 5,475 — — — — — — 5,810 Issuance of common stock — — 6,000 60 34,944 — — — 35,004 — — — — — — — Issuance of preferred stock — — — — — — — — — — — 10,961 245,827 1,404 33,922 — Issuance of restricted shares/units — — 349 3 2 — — — 5 — — — — — — — Forfeiture of restricted common shares — — ( 22 ) — — — — — — — — — — — — — PSU dividend claw back upon cancellation — — — — — 7 — — 7 — — — — — — — Dividends declared - common stock - ($ 0.08 /share) — — — — — ( 5,672 ) — — ( 5,672 ) — — — — — — — Dividends declared – preferred stock - Series B ($ 1.38 /share) — — — — — ( 4,233 ) — — ( 4,233 ) — — — — — — — Dividends declared – preferred stock - Series D ($ 2.06 /share) — — — — — ( 3,300 ) — — ( 3,300 ) — — — — — — — Dividends declared – preferred stock - Series E ($ 1.97 /share) — — — — — ( 12,694 ) — — ( 12,694 ) — — — — — — — Dividends declared - preferred stock - Series M ($ 2.05 /share) — — — — — ( 1,276 ) — — ( 1,276 ) — — — — — — — Contributions from noncontrolling interests — — — — — — — 164 164 — — — — — — — Distributions to noncontrolling interests — — — — — — — ( 2,024 ) ( 2,024 ) — — — — — — ( 665 ) Performance LTIP dividend claw back upon cancellation — — — — — — — — — — — — — — — 4 Net income (loss) — — — — — 17,761 — 2,063 19,824 — — — — — — ( 476 ) Redemptions of preferred stock — — — — — — — — — — — ( 14 ) ( 365 ) ( 5 ) ( 134 ) — Redemption value adjustment - preferred stock — — — — — ( 6,954 ) — — ( 6,954 ) — — — 6,275 — 679 — Redemption value adjustment — — — — — 205 — — 205 — — — — — — ( 205 ) Balance at December 31, 2022 1,600 $ 16 69,919 $ 699 $ 734,134 $ ( 324,740 ) $ — $ ( 16,346 ) $ 393,763 3,078 $ 65,426 12,657 $ 291,076 1,428 $ 35,182 $ 40,555 Purchase of common stock — — ( 3,969 ) ( 40 ) ( 19,214 ) — — — ( 19,254 ) — — — — — — — Equity-based compensation — — — — 3,564 — — — 3,564 — — — — — — 5,680 Issuance of preferred stock — — — — — — — — — — — 3,931 88,448 542 13,051 — Issuance of restricted shares/units — — 689 7 14 — — — 21 — — — — — — — Forfeiture of restricted common shares — — ( 3 ) — — — — — — — — — — — — — Dividends declared - common stock - $ 0.20 /share) — — — — — ( 13,423 ) — — ( 13,423 ) — — — — — — — Dividends declared – preferred stock - Series B ($ 1.38 /share) — — — — — ( 4,233 ) — — ( 4,233 ) — — — — — — — Dividends declared – preferred stock - Series D ($ 2.06 /share) — — — — — ( 3,300 ) — — ( 3,300 ) — — — — — — — Dividends declared – preferred stock - Series E ($ 1.91 /share) — — — — — ( 30,883 ) — — ( 30,883 ) — — — — — — — Dividends declared - preferred stock - Series M ($ 2.07 /share) — — — — — ( 3,888 ) — — ( 3,888 ) — — — — — — — Contributions from noncontrolling interests — — — — — — — 9,517 9,517 — — — — — — — Distributions to noncontrolling interests — — — — — — — ( 3,724 ) ( 3,724 ) — — — — — — ( 1,444 ) Redemption/conversion of operating partnership units — — — — — — — — — — — — — — — ( 7,162 ) Net income (loss) — — — — — ( 27,017 ) — 1,619 ( 25,398 ) — — — — — — ( 5,230 ) Redemptions of preferred stock — — — — — — — — — — — ( 272 ) ( 6,423 ) ( 137 ) ( 3,395 ) — Redemption value adjustment - preferred stock — — — — — ( 4,719 ) — — ( 4,719 ) — — — 3,934 — 785 — Redemption value adjustment — — — — — 4 — — 4 — — — — — — ( 4 ) Balance at December 31, 2023 1,600 $ 16 66,636 $ 666 $ 718,498 $ ( 412,199 ) $ — $ ( 8,934 ) $ 298,047 3,078 $ 65,426 16,316 $ 377,035 1,833 $ 45,623 $ 32,395 Purchase of common stock — — ( 170 ) ( 2 ) ( 367 ) — — — ( 369 ) — — — — — — — Equity-based compensation — — — — 403 — — — 403 — — — — — — 2,208 Issuance of preferred stock — — — — — — — — — — — 130 3,260 6 143 — 111 8.25 % Series D Cumulative Preferred Stock Accumulated Other Comprehensive Income/(loss) Noncontrolling Interests in Consolidated Entities Total 5.50 % Series B Cumulative Convertible Preferred Stock Series E Redeemable Preferred Stock Series M Redeemable Preferred Stock Redeemable Noncontrolling Interest in Operating Partnership Common Stock Additional Paid-in Capital Accumulated Deficit Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Issuance of restricted shares/units — — 143 1 2 — — — 3 — — — — — — 32 Forfeiture of restricted common shares — — ( 1 ) — — — — — — — — — — — — — Dividends declared - common stock - $ 0.20 /share) — — — — — ( 13,401 ) — — ( 13,401 ) — — — — — — — Dividends declared – preferred stock - Series B ($ 1.38 /share) — — — — — ( 4,233 ) — — ( 4,233 ) — — — — — — — Dividends declared – preferred stock - Series D ($ 2.06 /share) — — — — — ( 3,300 ) — — ( 3,300 ) — — — — — — — Dividends declared – preferred stock - Series E ($ 1.88 /share) — — — — — ( 29,328 ) — — ( 29,328 ) — — — — — — — Dividends declared - preferred stock - Series M ($ 2.10 /share) — — — — — ( 3,434 ) — — ( 3,434 ) — — — — — — — Contributions from noncontrolling interests — — — — — — — 2,961 2,961 — — — — — — — Distributions to noncontrolling interests — — — — — — — ( 23,322 ) ( 23,322 ) — — — — — — ( 1,397 ) Net income (loss) — — — — — ( 1,693 ) — 25,928 24,235 — — — — — — ( 4,472 ) Redemptions of preferred stock — — — — — — — — — — — ( 1,535 ) ( 36,554 ) ( 362 ) ( 9,047 ) — Unrealized gain (loss) on investment in securities — — — — — — ( 684 ) — ( 684 ) — — — — — — ( 60 ) Redemption value adjustment - preferred stock — — — — — ( 8,958 ) — — ( 8,958 ) — — — 8,761 — 197 — Redemption value adjustment — — — — — ( 1,258 ) — — ( 1,258 ) — — — — — — 1,258 Balance at December 31, 2024 1,600 $ 16 66,608 $ 665 $ 718,536 $ ( 477,804 ) $ ( 684 ) $ ( 3,367 ) $ 237,362 3,078 $ 65,426 14,911 $ 352,502 1,477 $ 36,916 $ 29,964 See Notes to Consolidated Financial Statements. 112 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 19,763 $ ( 30,628 ) $ 19,348 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 98,733 93,272 78,122 Equity-based compensation 2,611 9,244 11,285 Bad debt expense 318 915 838 (Gain) loss on extinguishment of debt 22 ( 2,318 ) — Amortization of loan costs, discounts and capitalized default interest 6,890 2,195 ( 816 ) Write-off of loan costs and exit fees 6,111 3,489 146 Amortization of intangibles 453 474 474 Amortization of non-refundable membership initiation fees ( 2,200 ) ( 1,776 ) ( 1,470 ) Interest expense accretion on refundable membership club deposits 616 671 723 (Gain) loss on disposition of assets and hotel property ( 88,165 ) — — Realized and unrealized (gain) loss on derivatives ( 585 ) 663 ( 4,961 ) Non-cash interest income ( 207 ) — — Equity in (earnings) loss of unconsolidated entity 1,608 253 328 Deferred income tax expense (benefit) ( 96 ) 1,329 51 Changes in operating assets and liabilities, exclusive of acquisitions, disposition of assets and hotel property: Accounts receivable and inventories 6,260 11,264 ( 9,088 ) Prepaid expenses and other assets 3,058 ( 5,758 ) ( 501 ) Accounts payable and accrued expenses 8,454 47 1,650 Operating lease right-of-use assets 416 592 588 Due to/from related parties, net 452 1,541 832 Due to/from third-party hotel managers ( 5,266 ) 8,398 2,590 Due to/from Ashford Inc. 4,632 ( 10,361 ) 8,249 Operating lease liabilities ( 157 ) ( 313 ) ( 294 ) Other liabilities 3,096 1,518 1,389 Net cash provided by (used in) operating activities 66,817 84,711 109,483 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from property insurance 958 361 36 Proceeds from hotel management agreement amendment — — 1,667 Issuance of note receivable ( 8,076 ) — — Payments for initial franchise fee — ( 75 ) — Acquisition of hotel properties, net of cash and restricted cash acquired — — ( 354,445 ) Net proceeds from sale of hotel property 155,583 — — Purchase of securities ( 42,279 ) — — Investment in unconsolidated entity ( 79 ) ( 238 ) ( 328 ) Improvements and additions to hotel properties ( 70,598 ) ( 77,114 ) ( 49,148 ) Net cash provided by (used in) investing activities 35,509 ( 77,066 ) ( 402,218 ) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on indebtedness 234,000 370,600 170,500 Repayments of indebtedness ( 184,100 ) ( 534,307 ) ( 68,500 ) Payments of loan costs and exit fees ( 15,372 ) ( 11,636 ) ( 4,080 ) Payments for derivatives ( 1,592 ) ( 5,051 ) ( 3,030 ) Proceeds from derivatives 4,904 7,720 167 Purchase of common stock ( 369 ) ( 19,307 ) ( 7,411 ) Payments for dividends and distributions ( 51,558 ) ( 52,563 ) ( 20,763 ) Net proceeds from issuance of preferred stock — 97,862 278,621 Common stock offering costs — — ( 112 ) Contributions from noncontrolling interest in consolidated entities 2,961 9,517 164 113 Year Ended December 31, 2024 2023 2022 Redemption of operating partnership units — ( 7,162 ) — Distributions to noncontrolling interest in consolidated entities ( 27,045 ) ( 2,693 ) — Redemption of preferred stock ( 45,601 ) ( 9,818 ) ( 499 ) Net cash provided by (used in) financing activities ( 83,772 ) ( 156,838 ) 345,057 Net change in cash, cash equivalents and restricted cash 18,554 ( 149,193 ) 52,322 Cash, cash equivalents and restricted cash at beginning of period 166,503 315,696 263,374 Cash, cash equivalents and restricted cash at end of period $ 185,057 $ 166,503 $ 315,696 SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 102,541 $ 91,576 $ 48,901 Income taxes paid (refunded) ( 728 ) 3,424 1,239 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Dividends and distributions declared but not paid $ 9,255 $ 9,158 $ 8,184 Common stock purchases accrued but not paid — — 54 Assumption of debt in hotel acquisition — — 58,601 Capital expenditures accrued but not paid 8,825 21,702 6,702 Issuance of common stock for hotel acquisition — — 35,040 Distributions declared but not paid to a noncontrolling interest in a consolidated entity — — 2,024 Accrued preferred stock offering expenses — — 23 Non-cash preferred stock dividends 3,403 3,614 1,050 Non-cash common stock dividends — — 5 Unsettled proceeds from derivatives 113 361 330 Non-cash common stock/unit dividends 35 20 — SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents at beginning of period $ 85,599 $ 261,541 $ 215,998 Restricted cash at beginning of period 80,904 54,155 47,376 Cash, cash equivalents and restricted cash at beginning of period $ 166,503 $ 315,696 $ 263,374 Cash and cash equivalents at end of period $ 135,465 $ 85,599 $ 261,541 Restricted cash at end of period 49,592 80,904 54,155 Cash, cash equivalents and restricted cash at end of period $ 185,057 $ 166,503 $ 315,696 See Notes to Consolidated Financial Statements. 114 Table of Contents BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2024, 2024 and 2022 1. Organization and Description of Business Braemar Hotels & Resorts Inc., together with its subsidiaries (“Braemar”), is a Maryland corporation that invests primarily in high revenue per available room (“RevPAR”) luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by STR, LLC. Braemar has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). Braemar conducts its business and owns substantially all of its assets through its operating partnership, Braemar Hospitality Limited Partnership (“Braemar OP”). Terms such as the “Company,” “we,” “us” or “our” refer to Braemar Hotels & Resorts Inc. and, as the context may require, all entities included in its consolidated financial statements. We are advised by Ashford Hospitality Advisors LLC (“Ashford LLC” or the “Advisor”) through an advisory agreement. Ashford LLC is a subsidiary of Ashford Inc. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC. We do not operate any of our hotel properties directly; instead, we contractually engage hotel management companies to operate them for us under management contracts. Remington Lodging & Hospitality, LLC (“Remington Hospitality”), a subsidiary of Ashford Inc., manages four of our 15 hotel properties. Third-party management companies manage the remaining hotel properties. Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to, design and construction services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory and brokerage services, insurance policies covering general liability, workers compensation and business automobile claims, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services, mobile key technology and cash management services. The accompanying consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of December 31, 2024, own 15 hotel properties in seven states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands (“USVI”). The portfolio includes 14 wholly-owned hotel properties and one hotel property that is owned through a partnership in which Braemar OP has a controlling interest. These hotel properties represent 3,807 total rooms, or 3,667 net rooms, excluding those attributable to our partner. As a REIT, Braemar is required to comply with limitations imposed by the Code related to operating hotels. As of December 31, 2024, 14 of our 15 hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively, the TRS entities are referred to as “Braemar TRS”). One hotel property, located in the USVI, is owned by our USVI TRS. Braemar TRS then engages third-party or affiliated hotel management companies to operate the hotel properties under management contracts. Hotel operating results related to the hotel properties are included in the consolidated statements of operations. As of December 31, 2024, 13 of the 15 hotel properties were leased by Braemar’s wholly-owned TRS, and the one hotel property majority-owned through a consolidated partnership was leased to a TRS wholly-owned by such consolidated partnership. Each leased hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues. Lease revenue from Braemar TRS is eliminated in consolidation. The hotel properties are operated under management contracts with Marriott Hotel Services, LLC (“Marriott”), Hilton Management LLC (“Hilton”), Accor Management US Inc. (“Accor”), Four Seasons Hotels Limited (“Four Seasons”), Hyatt Corporation (“Hyatt”), The Ritz-Carlton Hotel Company, L.L.C. and its affiliates, each of which is also an affiliate of Marriott (“Ritz-Carlton”), and Remington Hospitality, which are eligible independent contractors under the Code. 2. Significant Accounting Policies Basis of Presentation and Principles of Consolidation —The accompanying consolidated financial statements include the accounts of Braemar Hotels & Resorts Inc., its majority-owned subsidiaries, and its majority-owned entities in which it has a controlling interest. All significant intercompany accounts and transactions between consolidated entities have been eliminated in these consolidated financial statements. Braemar OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of 115 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) the VIE or the right to receive benefits from the VIE. All major decisions related to Braemar OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly owned subsidiary, Braemar OP General Partner LLC (formerly Ashford Prime OP General Partner LLC), its general partner. As such, we consolidate Braemar OP. The following items affect reporting comparability of our historical consolidated financial statements: • on March 11, 2022, we acquired The Ritz-Carlton Reserve Dorado Beach hotel located in Dorado, Puerto Rico. The operating results of the hotel property have been included in the results of operations from its acquisition date; • on December 1, 2022, we acquired the Four Seasons Resort Scottsdale. The operating results of the hotel property have been included in the results of operations from its acquisition date; and • On July 17, 2024, we sold the Hilton La Jolla Torrey Pines. The operating results of the hotel property were excluded from our results of operations as of the disposition date. Use of Estimates —The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents —Cash and cash equivalents include cash on hand or held in banks and short-term investments with an initial maturity of three months or less at the date of purchase. Restricted Cash —Restricted cash includes reserves for debt service, real estate taxes, and insurance, as well as excess cash flow deposits and reserves for furniture, fixtures, and equipment (“FF&E”) replacements of approximately 3 % to 5 % of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions. Accounts Receivable —Accounts receivable consists primarily of meeting and banquet room rental and hotel guest receivables. We generally do not require collateral. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of guests to make required payments for services. The allowance is maintained at a level believed adequate to absorb estimated receivable losses. The estimate is based on past receivable loss experience, known and inherent credit risks, current economic conditions, and other relevant factors, including specific reserves for certain accounts. Inventories —Inventories, which primarily consist of food, beverages, and gift store merchandise, are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Investments in Hotel Properties, net —Hotel properties are generally stated at cost. All improvements and additions which extend the useful life of the hotel properties are capitalized. For property and equipment acquired in a business combination, we record the assets acquired based on their fair value as of the acquisition date. Replacements and improvements and finance leases are capitalized, while repairs and maintenance are expense as incurred. Property and equipment acquired in an asset acquisition are recorded at cost. The acquisition cost is allocated to land, buildings, improvements, furniture, fixtures and equipment, as well as identifiable intangible and lease assets and liabilities. Acquisition cost is allocated using relative fair values. We evaluate several factors, including weighted market data for similar assets, expected future cash flows discounted at risk adjusted rates, and replacement costs for assets to determine an appropriate exit cost when evaluating the fair values. Impairment of Investments in Hotel Properties —Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of the hotel is measured by comparison of the carrying amount of the hotel to the estimated future undiscounted cash flows, which take into account current market conditions and our intent with respect to holding or disposing of the hotel. If our analysis indicates that the carrying value of the hotel is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the property’s net book value exceeds its estimated fair value, or fair value, less cost to sell. In evaluating the impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period and expected useful life. Fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions and third-party appraisals, where considered necessary. Asset write-downs resulting from property damage are recorded up to the amount of the allocable property insurance deductible in the period that the property damage occurs. See note 4. 116 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Assets Held for Sale and Discontinued Operations —We classify assets as held for sale when we have obtained a firm commitment from a buyer, and consummation of the sale is considered probable and expected within one year. The related operations of assets held for sale are reported as discontinued if the disposal is a component of an entity or group of components that represents a strategic shift that has (or will have) a major effect on our operations and cash flows. Depreciation and amortization will cease as of the date assets have met the criteria to be deemed held for sale. Investment in Unconsolidated Entity —As of December 31, 2024, we held a 7.9 % ownership interest in OpenKey, which is accounted for under the equity method of accounting by recording the initial investment and our percentage of interest in the entities’ net income/loss. We review our investment in unconsolidated entity for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of our investment. Any impairment is recorded in equity in earnings (loss) of unconsolidated entity. See note 6 . Our investment in unconsolidated entity is considered to be a variable interest in the underlying entity. VIEs, as defined by authoritative accounting guidance, must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Because we do not have the power and financial responsibility to direct the unconsolidated entity’s activities and operations, we are not considered to be the primary beneficiary of this entity on an ongoing basis and therefore such entity should not be consolidated. Leases —We determine if an arrangement is a lease at the commencement date. Operating leases, as lessee, are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on our consolidated balance sheets. We currently do not have any finance leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms used to calculate our right-of-use asset may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Subsequent to the initial recognition, lease liabilities are measured using the effective interest method. The ROU asset is generally reduced utilizing a straight-line method adjusted for the lease liability accretion during the period. We have lease agreements with lease and non-lease components, which under the elected practical expedients under ASC 842, we are not accounting for separately. For certain equipment leases, such as office equipment, copiers and vehicles, we account for the lease and non-lease components as a single lease component. Intangible Assets, net —Intangible assets, net represents the customer relationships associated with The Ritz-Carlton Sarasota acquisition, which are amortized using the straight-line method over its expected useful life, which approximates amortization based on economic consumption. See note 21. Derivative Instruments —We use interest rate derivatives to hedge our risks and to capitalize on the historical correlation between changes in SOFR (Secured Overnight Financing Rate) and RevPAR. Interest rate derivatives could include swaps, caps, floors and flooridors. All derivatives are recorded at fair value in accordance with the applicable authoritative accounting guidance. None of our derivative instruments are designated as cash flow hedges. Interest rate derivatives are reported as “derivative assets” in our consolidated balance sheets. For interest rate derivatives and credit default swaps, changes in fair value and realized gains and losses are recognized in earnings as “realized and unrealized gain (loss) on derivatives” in our consolidated statements of operations. Accrued interest on interest rate derivatives is included in “accounts receivable, net” in the consolidated balance sheets. Due to/from Related Parties, net —Due to/from related parties, net, represent current receivables and payables resulting from transactions related to hotel management with a related party. Due to/from related parties is generally settled within a period not exceeding one year . See note 17. 117 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Due to/from Ashford Inc. —Due to/from Ashford Inc. represents payables related to the advisory services fee, including reimbursable expenses as well as other hotel products and services. These payables are generally settled within a period not exceeding one year . See note 17. Due to/from Third-Party Hotel Managers —Due to/from third-party hotel managers primarily consists of amounts due from Marriott related to our cash reserves held at the Marriott corporate level related to our operations, real estate taxes, and other items, as well as current receivables and payables resulting from transactions with other third-party managers related to hotel management. These receivables and payables are generally settled within a period not exceeding one year . Noncontrolling Interests —The redeemable noncontrolling interests in the operating partnership represent the limited partners’ proportionate share of equity in earnings/losses of the operating partnership, which is an allocation of net income/loss attributable to the common unitholders based on the weighted average ownership percentage of these limited partners’ common unit holdings throughout the period. The redeemable noncontrolling interests in our operating partnership is classified in the mezzanine section of our consolidated balance sheets as these redeemable operating partnership units do not meet the requirements for permanent equity classification prescribed by the authoritative accounting guidance because these redeemable operating partnership units may be redeemed by the holder for cash or registered shares in certain cases outside of the Company’s control. The carrying value of the noncontrolling interests in the operating partnership is based on the greater of the accumulated historical cost or the redemption value. The noncontrolling interest in consolidated entities represents an ownership interest of 25 % in one and two hotel properties at December 31, 2024 and 2023, respectively, and is reported in equity in our consolidated balance sheets. Net income/loss attributable to redeemable noncontrolling interests in operating partnership and income/loss from consolidated entities attributable to noncontrolling interests in our consolidated entities are reported as deductions/additions from/to net income/loss. Comprehensive income/loss attributable to these noncontrolling interests is reported as reductions/additions from/to comprehensive income/loss. Revenue Recognition —Rooms revenue represents revenues from the occupancy of our hotel rooms, which is driven by the occupancy and average daily rate. Rooms revenue includes revenue for guest no-shows, day use, and early/late departure fees. The contracts for room stays with customers are generally short in duration and revenues are recognized as services are provided over the course of the hotel stay. Advance deposits are recorded as liabilities when a customer or group of customers provides a deposit for a future stay or banquet event at our hotels. Advance deposits are converted to revenue when the services are provided to the customer or when the customer with a noncancellable reservation fails to arrive for part or all of the reservation. Conversely, advance deposits are generally refundable upon guest cancellation of the related reservation within an established period of time prior to the reservation. Our advance deposit balance as of December 31, 2024 and 2023 was $ 58.7 million and $ 49.4 million, respectively, and are generally recognized as revenue within a one-year period. These are included in “accounts payable and accrued expenses” on the consolidated balance sheets. Food & Beverage (“F&B”) revenue consists of revenue from the restaurants and lounges at our hotel properties, in-room dining and mini-bars revenue, and banquet/catering revenue from group and social functions. Other F&B revenue may include revenue from audiovisual equipment/services, rental of function rooms, and other F&B related revenues. Revenue is recognized as the services or products are provided. Our hotel properties may employ third parties to provide certain services at the property, for example, audio visual services. We evaluate each of these contracts to determine if the hotel is the principal or the agent in the transaction, and record the revenues as appropriate (i.e. gross vs. net). Other revenue consists of ancillary revenue at the property, including attrition and cancellation fees, condo management fees, resort and destination fees, health center fees, spas, golf, telecommunications, parking, entertainment and other guest services, as well as rental revenue primarily from leased retail outlets at our hotel properties, and membership initiation fees and dues, primarily from club memberships. Cancellation fees are recognized from non-cancellable deposits when the customer provides notification of cancellation in accordance with established management policy time frames. Non-refundable membership initiation fees are recognized over the expected life of an active membership. Taxes specifically collected from customers and submitted to taxing authorities are not recorded in revenue. Other Hotel Expenses —Other hotel expenses include Internet, telephone charges, guest laundry, valet parking, hotel-level general and administrative, sales and marketing expenses, repairs and maintenance, franchise fees and utility costs. They are expensed as incurred. 118 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Advertising Costs —Advertising costs are charged to expense as incurred. For the years ended December 31, 2024, 2023 and 2022, we incurred advertising costs of $ 6.5 million, $ 6.4 million and $ 6.5 million, respectively. Advertising costs are included in “other” hotel expenses in our consolidated statements of operations. Equity-Based Compensation —Stock/unit-based compensation for non-employees is measured at the grant date and expensed ratably over the vesting period based on the original measurement as of the grant date. This results in the recording of expense, included in “advisory services fee,” “management fees” and “corporate general and administrative” expense, equal to the ratable amount of the grant date fair value based on the requisite service period satisfied during the period. The Company recognizes forfeitures as they occur. The compensation committee utilizes a performance metric, pursuant to which, the performance awards will be eligible to vest, from 0 % to 200 % of target, based on achievement of certain performance targets over the three-year performance period. The performance criteria are based on performance conditions under the relevant literature. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award. The compensation expense may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period. Depreciation and Amortization —Hotel properties are depreciated over the estimated useful life of the assets and leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related assets. Presently, hotel properties are depreciated using the straight-line method over lives ranging from 7.5 to 39 years for buildings and improvements and 1.5 to 5 years for FF&E. While we believe our estimates are reasonable, a change in estimated useful lives could affect depreciation expense and net income (loss) as well as resulting gains or losses on potential hotel sales. Income Taxes —As a REIT, we generally are not subject to federal corporate income tax on the portion of our net income (loss) that does not relate to TRSs. However, Braemar TRS and our USVI TRS are treated as TRSs for U.S. federal income tax purposes. In accordance with authoritative accounting guidance, we account for income taxes related to our TRSs using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, the analysis utilized by us in determining our deferred tax asset valuation allowance involves considerable management judgment and assumptions. See note 20. The entities that own 14 of our 15 hotel properties are considered partnerships for U.S. federal income tax purposes. Partnerships are not subject to U.S. federal income taxes. Partnerships are not subject to U.S. federal income tax on their income. Instead, each of its partners is required to include in income its allocable share of the partnership’s income. The states and cities where the partnerships operate follow the U.S. federal income tax treatment, with the exception of the District of Columbia, Puerto Rico and the city of Philadelphia. Accordingly, we provide for income taxes in these jurisdictions for the partnerships. The consolidated entities that operate the 15 hotel properties are considered taxable corporations for U.S. federal, foreign, state, and city income tax purposes and have elected to be TRSs of Braemar. The “Income Taxes” topic of the FASB’s ASC addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance requires us to determine whether tax positions we have taken or expect to take in a tax return are more likely than not to be sustained upon examination by the appropriate taxing authority based on the technical merits of the positions. Tax positions that do not meet the more likely than not threshold would be recorded as additional tax expense in the current period. We analyze all open tax years, as defined by the statute of limitations for each jurisdiction, which includes the federal jurisdiction and various states. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction, USVI, Puerto Rico and various states and cities. Tax years 2020 through 2024 remain subject to potential examination by certain federal, foreign and state taxing authorities. Income (Loss) Per Share —Basic income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding during the period using the two-class method prescribed by applicable authoritative accounting guidance. Diluted income (loss) per common share is calculated using the two-class method, or the treasury stock method, if more dilutive. Diluted income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share. 119 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Recently Issued Accounting Standards —In December 2023, the Financial Accounting Standards Board’s (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. The amendments in this ASU may be applied prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or the amendments may be applied retrospectively by providing the revised disclosures for all periods presented. As of December 31, 2024, the Company has not adopted this ASU. The adoption of this ASU is expected to only impact disclosures with respect to the Company’s consolidated financial statements. In November 2024, the FASB issued ASU 2024-03 , Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses that requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the statement of operations. In January 2025, the FASB issued ASU 2025-01 which amends the effective date of the new disaggregation of income statement expenses standard to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after Dec. 15, 2026, and interim periods within annual reporting periods beginning after Dec. 15, 2027. Early adoption is still permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact this ASU will have on our disclosures. Recently Adopted Accounting Standards —In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. We adopted the standard effective for the year ended December 31, 2024. See note 23. 3. Revenu e The following tables present our revenue disaggregated by geographical areas (in thousands): Year Ended December 31, 2024 Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total California 5 $ 92,330 $ 25,051 $ 15,763 $ 133,144 Puerto Rico 1 49,994 17,609 10,785 78,388 Arizona 1 36,704 26,062 9,347 72,113 Colorado 1 24,067 14,084 9,756 47,907 Florida 2 59,651 31,635 25,357 116,643 Illinois 1 27,949 7,283 2,336 37,568 Pennsylvania 1 28,642 6,358 1,455 36,455 Washington 1 30,317 5,234 3,225 38,776 Washington, D.C. 1 42,164 19,251 3,719 65,134 USVI 1 45,042 19,476 9,857 74,375 Sold hotel property 1 15,501 9,207 3,193 27,901 Total 16 $ 452,361 $ 181,250 $ 94,793 $ 728,404 120 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Year Ended December 31, 2023 Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total California 5 $ 98,412 $ 27,161 $ 14,876 $ 140,449 Puerto Rico 1 50,436 18,214 11,595 80,245 Arizona 1 35,789 23,803 8,074 67,666 Colorado 1 25,351 14,888 9,096 49,335 Florida 2 61,446 32,418 22,297 116,161 Illinois 1 25,512 6,337 2,068 33,917 Pennsylvania 1 26,222 5,564 1,331 33,117 Washington 1 28,410 4,425 1,794 34,629 Washington, D.C. 1 36,615 19,234 1,867 57,716 USVI 1 47,971 17,460 9,963 75,394 Sold hotel property 1 28,735 15,827 6,152 50,714 Total 16 $ 464,899 $ 185,331 $ 89,113 $ 739,343 Year Ended December 31, 2022 Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total California 5 $ 106,755 $ 30,267 $ 13,641 $ 150,663 Puerto Rico 1 38,077 14,238 8,931 61,246 Arizona 1 3,107 1,430 657 5,194 Colorado 1 25,253 16,397 8,965 50,615 Florida 2 73,629 34,068 24,771 132,468 Illinois 1 24,829 7,150 1,656 33,635 Pennsylvania 1 22,237 4,121 1,178 27,536 Washington 1 21,445 3,619 1,321 26,385 Washington, D.C. 1 29,877 13,276 1,960 45,113 USVI 1 58,426 18,990 10,238 87,654 Sold hotel property 1 27,880 15,685 5,511 49,076 Total 16 $ 431,515 $ 159,241 $ 78,829 $ 669,585 4. Investments in Hotel Properties, net Investments in hotel properties, net consisted of the following (in thousands): December 31, 2024 December 31, 2023 Land $ 630,842 $ 630,842 Buildings and improvements 1,430,096 1,535,501 Furniture, fixtures and equipment 158,470 166,673 Construction in progress 20,420 36,954 Residences 12,746 12,746 Total cost 2,252,574 2,382,716 Accumulated depreciation ( 473,888 ) ( 498,508 ) Investments in hotel properties, net $ 1,778,686 $ 1,884,208 For the years ended December 31, 2024, 2023 and 2022, depreciation expense was $ 98.2 million, $ 92.6 million and $ 78.0 million, respectively. Impairment Charges During the years ended December 31, 2024, 2023 and 2022, no impairment charges were recorded. 5. Hotel Disposition On July 17, 2024, the Company sold the Hilton La Jolla Torrey Pines 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. 121 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The sale resulted in a gain of approximately $ 88.1 million for the year ended December 31, 2024 and is included in “gain (loss) on disposition of assets and hotel property” in our consolidated statements of operations. Since the sale of the hotel property did not represent a strategic shift that has (or will have) a major effect on our operations or financial results, its results of operations were not reported as discontinued operations in our consolidated financial statements. We included the results of operations for this hotel property through the date of disposition in net income (loss) as shown in our consolidated statements of operations for the year ended December 31, 2024, 2023 and 2022 , respectively . The following table includes the consolidated financial information from this hotel property (in thousands): Year Ended December 31, 2024 2023 2022 Total hotel revenue $ 27,901 $ 50,714 $ 49,076 Total hotel operating expenses ( 17,194 ) ( 30,999 ) ( 29,336 ) Property taxes, insurance and other ( 1,704 ) ( 2,876 ) ( 2,532 ) Depreciation and amortization ( 2,328 ) ( 4,176 ) ( 4,118 ) Gain (loss) on disposition of assets and hotel property 88,115 — — Operating income (loss) 94,790 12,663 13,090 Interest income 273 346 73 Interest expense and amortization of loan costs ( 3,856 ) ( 6,069 ) ( 3,202 ) Write-off of loan costs and exit fees ( 101 ) — ( 21 ) Income (loss) before income taxes 91,106 6,940 9,940 Income from consolidated entities attributable to noncontrolling interests ( 27,995 ) ( 3,335 ) ( 3,419 ) (Income) loss before income taxes attributable to redeemable noncontrolling interests in operating partnership ( 5,028 ) ( 247 ) ( 502 ) Income (loss) before income taxes attributable to the Company $ 58,083 $ 3,358 $ 6,019 6. Investment in Unconsolidated Entity OpenKey, Inc. (“OpenKey”), which is controlled and consolidated by Ashford Inc., is a hospitality-focused mobile key platform that provides a universal smart phone app and related hardware and software for keyless entry into hotel guest rooms. As of December 31, 2024, the Company has made equity investments in OpenKey totaling $ 2.9 million. All investments were recommended by our Related Party Transactions Committee and unanimously approved by the independent members of our board of directors. Our investment is recorded as “investment in unconsolidated entity” in our consolidated balance sheets and is accounted for under the equity method of accounting as we have significant influence over the entity under the applicable accounting guidance. The following table summarizes our carrying value and ownership interest in OpenKey: December 31, 2024 December 31, 2023 Carrying value of the investment in OpenKey (in thousands) $ — $ 1,416 Ownership interest in OpenKey 7.9 % 7.9 % The following table summarizes our equity in earnings (loss) in OpenKey (in thousands): Year Ended December 31, Line Item 2024 2023 2022 Equity in earnings (loss) of unconsolidated entity $ ( 297 ) $ ( 273 ) $ ( 328 ) 122 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) On February 2, 2023, the Company entered into a loan funding agreement with Ashford Inc. and OpenKey. Per the agreement, Ashford Inc. and the Company will provide OpenKey with a maximum loan amount of $ 5.0 million to be allocated on a pro-rata basis based on current ownership interests and funded quarterly. The loan bears interest at an annual rate of 15 %. Additionally, repayment of the loan principal and all accrued interest is due upon certain events. On February 27, 2024, the Company approved additional funding, together with Ashford Inc., up to $ 1.0 million in aggregate to OpenKey, allocated pro rata among them. As of December 31, 2024, funding of $ 79,000 has been made pursuant to the 2024 funding agreement. As of December 31, 2024, the Company has funded a total amount of approximately $ 317,000 . The following table summarizes our note receivable from OpenKey (in thousands): Line Item December 31, 2024 December 31, 2023 Investment in unconsolidated entity $ 145 $ 258 The following table summarizes the interest income associated with the loan to OpenKey (in thousands): Year Ended December 31, Line Item 2024 2023 2022 Equity in earnings (loss) of unconsolidated entity $ 40 $ 20 $ — We review our investment in OpenKey, which includes our note receivable, for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of the investment. Any impairment is recorded in equity in earnings (loss) of unconsolidated entity. As of December 31, 2024, we determined that the estimated fair value of the investment in OpenKey was less than our carrying amount. During the year ended December 31, 2024, we recorded an impairment charge of $ 1.1 million associated with the equity investment in OpenKey and an impairment charge of $ 232,000 associated with the note receivable from OpenKey. The impairment charges are included in “equity in earnings (loss) of unconsolidated entity” in our consolidated statements of operations. There were no impairment charges recorded for the years ended December 31, 2023 and 2022. 123 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 7. Indebtedness, net Indebtedness, net consisted of the following (dollars in thousands): Indebtedness Collateral Current Maturity Final Maturity (15) Interest Rate December 31, 2024 December 31, 2023 Debt Balance Book Value of Collateral Debt Balance Book Value of Collateral Mortgage loan (3) Cameo Beverly Hills August 2024 August 2024 SOFR (1) + 3.66 % $ — — $ 30,000 71,196 Mortgage loan (4) Hilton La Jolla Torrey Pines August 2024 August 2024 9.00 % — — 66,600 66,947 Mortgage loan (5) The Ritz-Carlton Lake Tahoe January 2025 January 2026 SOFR (1) + 3.60 % 53,413 135,287 53,413 132,467 Mortgage loan (6) Park Hyatt Beaver Creek Resort & Spa February 2025 February 2027 SOFR (1) + 2.86 % 70,500 144,707 70,500 140,966 Mortgage loan (7) The Notary Hotel June 2025 June 2025 SOFR (1) + 2.66 % 293,180 354,893 293,180 378,335 The Clancy Sofitel Chicago Magnificent Mile Marriott Seattle Waterfront Mortgage loan (8)(9) The Ritz-Carlton St. Thomas August 2025 August 2026 SOFR (1) + 4.35 % — — 42,500 114,224 Mortgage loan (9)(10) Pier House Resort & Spa September 2025 September 2026 SOFR (1) + 3.60 % — — 80,000 81,806 Mortgage loan (11) The Ritz-Carlton Reserve Dorado Beach March 2026 March 2026 SOFR (1) + 4.75 % 62,000 186,539 — — Convertible Senior Notes Equity June 2026 June 2026 4.50 % 86,250 — 86,250 — BAML Credit Facility (9)(12) Bardessono Hotel & Spa July 2026 July 2027 Base Rate (2) + 1.25 % to 2.00 % or SOFR (1) + 2.35 % to 3.10 % — — 200,000 303,405 Hotel Yountville The Ritz-Carlton Sarasota Mortgage loan (9) Bardessono Hotel & Spa August 2026 August 2029 SOFR (1) + 3.24 % 407,000 496,223 — — Hotel Yountville The Ritz-Carlton Sarasota Pier House Resort & Spa The Ritz-Carlton St. Thomas Mortgage loan (13) Four Seasons Resort Scottsdale December 2026 December 2028 SOFR (1) + 3.75 % 140,000 255,631 140,000 261,737 Mortgage loan (14) Capital Hilton December 2026 December 2028 SOFR (1) + 3.75 % 110,600 134,013 110,600 143,840 1,222,943 1,707,293 1,173,043 1,694,923 Capitalized default interest and late charges, net — 120 Deferred loan costs, net ( 11,985 ) ( 9,135 ) Premiums/(discounts), net ( 940 ) ( 1,584 ) Indebtedness, net $ 1,210,018 $ 1,162,444 __________________ (1) SOFR rates were 4.33 % and 5.35 % at December 31, 2024 and December 31, 2023, respectively. (2) Base Rate, as defined in the secured credit facility agreement, is the greater of (i) the prime rate set by Bank of America, (ii) federal funds rate + 0.50 %, (iii) Term SOFR + 1.00 %, or (iv) 1.00 %. (3) This mortgage loan had a SOFR floor of 1.50 %. On April 9, 2024, we repaid this mortgage loan. (4) On February 5, 2024, we amended this mortgage loan. Terms of the amendment included extending the maturity date by six months from February 2024 to August 2024, and converting the interest rate from a variable rate of SOFR + 1.70 % to a fixed rate of 9.00 %. This mortgage loan was secured by the Hilton La Jolla Torrey Pines. On July 17, 2024, we sold this property for $ 165.0 million and repaid the mortgage loan. (5) On January 14, 2025, we amended this mortgage loan. Terms of the amendment included a $ 10.0 million principal pay-down, current maturity date extension to July 2025, interest rate reduction to SOFR + 3.25 %, and one six-month extension option subject to satisfaction of certain conditions. (6) This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised February 2025. (7) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the fifth was exercised in June 2024. (8) On January 29, 2024, we amended this mortgage loan. Terms of the amendment included extending the current maturity date one year to August 2025, and the variable rate increased from SOFR + 4.04 % to SOFR 4.35 %. This amended mortgage loan had one one-year extension option, subject to satisfaction of certain conditions. This mortgage loan had a SOFR floor of 4.00 %. (9) On August 7, 2024, we refinanced this mortgage loan and credit facility into a new $ 407.0 million mortgage loan. The new mortgage loan is interest only and bears interest at a rate of SOFR + 3.24 %, has a two-year initial term, and has three one-year extension options, subject to satisfaction of certain conditions. Braemar holds a tranche of Commercial Mortgage-Backed Securities (“CMBS”), which is secured by the five hotel properties that serve as collateral for the new mortgage loan and has a par value of $ 42.2 million and a rate of SOFR + 5.20 %. The CMBS is reported as “investment in securities” on the consolidated balance sheet. (10) On January 3, 2024, we amended this mortgage loan. Terms of the amendment included extending the current maturity date one year to September 2025, and the variable rate increased from SOFR + 1.95 % to SOFR + 3.60 %. This mortgage loan had one one-year extension option, subject to satisfaction of certain conditions. (11) On March 7, 2024, we entered into a new $ 62.0 million mortgage loan. The new mortgage loan is interest only and bears interest at a rate of SOFR + 4.75 %. (12) This secured credit facility has one one-year extension option, subject to satisfaction of certain conditions. 124 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (13) This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions. This mortgage loan has a SOFR floor of 1.00 %. (14) This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions. This mortgage loan has a SOFR floor of 2.00 %. (15) The final maturity date assumes all available extension options will be exercised. On January 18, 2023, the Company repaid its $ 54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach, which resulted in a gain on extinguishment of debt of $ 2.3 million for the year ended December 31, 2023. The gain was primarily attributable to the premium that was recorded upon the assumption of the mortgage loan when the hotel was acquired. Convertible Senior Notes In May 2021, the Company issued $ 86.25 million aggregate principal amount of 4.50 % Convertible Senior Notes due June 2026 (the “Convertible Senior Notes”). The net proceeds from this offering of the Convertible Senior Notes were approximately $ 82.8 million after deducting the underwriting fees and other expenses paid by the Company. The Convertible Senior Notes are governed by an indenture between the Company and U.S. Bank National Association, as trustee. The Convertible Senior Notes bear interest at a rate of 4.50 % per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The Convertible Senior Notes will mature on June 1, 2026. For the years ended December 31, 2024, 2023 and 2022, the Company recorded coupon interest expense of $ 3.9 million, $ 3.9 million and $ 3.9 million, respectively. For the years ended December 31, 2024, 2023 and 2022, the Company recorded discount amortization of $ 621,000 , $ 589,000 and $ 553,000 respectively, related to the initial purchase discount, with the remaining discount balance to be amortized through June 2026. The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $ 6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances. As of December 31, 2024, the conversion rate is 182.1014 shares. In addition, following the occurrence of certain corporate events, if the Company provides notice of redemption or if it exercises its option to convert the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be. The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100 % of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date. Maturities and scheduled amortization of indebtedness as of December 31, 2024, assuming no extension of existing extension options for each of the following five years and thereafter are as follows (in thousands): 2025 $ 417,093 2026 805,850 2027 — 2028 — 2029 — Thereafter — Total $ 1,222,943 If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. As of December 31, 2024, we were in compliance with all covenants. 125 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. Note Receivable On July 2, 2024, Braemar, Ashford Hospitality Trust, Inc. (“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 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. 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 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 were 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. 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 December 31, 2024, the Company has advanced approximately $ 8.1 million that has been used to purchase 3.5 million shares of Braemar common stock. Note receivable is summarized in the table below (dollars in thousands): Line Item Interest Rate December 31, 2024 December 31, 2023 Note receivable SOFR + 3.00 % $ 8,283 $ — We recognized interest income as presented in the table below (in thousands): Year Ended December 31, Line Item 2024 2023 2022 Interest income $ 207 $ — $ — 126 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) We review receivables for impairment each reporting period. Under the model, the Company estimates credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument and is required to record a credit loss expense (or reversal) in each reporting period. Our assessment of impairment is based on considerable management judgment and assumptions. No impairment charges were recorded for the year ended December 31, 2024. 9. Derivative Instruments Interest Rate Derivatives —We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage these risks, we primarily use interest rate derivatives to hedge our debt and our cash flows, which include interest rate caps. All derivatives are recorded at fair value. Payments from counterparties on in-the-money interest rate caps are recognized as realized gains on our consolidated statements of operations. The following table summarizes the interest rate derivatives we entered into over the applicable periods: Year Ended December 31, Interest rate caps: (1) 2024 2023 2022 Notional amount (in thousands) $ 935,280 $ 537,780 $ 776,500 Strike rate low end of range 3.50 % 3.50 % 3.50 % Strike rate high end of range 8.00 % 5.25 % 4.50 % Effective date range January 2024 - December 2024 January 2023 - December 2023 February 2022 - December 2022 Termination date range January 2025 - August 2026 January 2024 - January 2026 May 2023 - January 2025 Total cost of interest rate caps (in thousands) $ 1,592 $ 5,051 $ 3,030 _______________ (1) No instruments were designated as cash flow hedges. Interest rate derivatives consisted of the following: Interest rate caps: (1) December 31, 2024 December 31, 2023 Notional amount (in thousands) $ 1,185,880 $ 778,280 Strike rate low end of range 3.50 % 2.00 % Strike rate high end of range 8.00 % 5.25 % Termination date range January 2025 - August 2026 June 2024- January 2025 Aggregate principal balance on corresponding mortgage loans (in thousands) $ 1,074,693 $ 777,693 _______________ (1) No instruments were designated as cash flow hedges. Warrants —On August 5, 2021, as part of the consideration paid to acquire the Cameo Beverly Hills (formerly known as the Mr. C Beverly Hills Hotel) and five adjacent luxury residences, the Company issued 500,000 warrants for the purchase of Braemar common stock with a $ 6.00 strike price on or after August 5, 2021 until August 5, 2024. The warrants expired worthless on August 5, 2024. 10. Fair Value Measurements Fair Value Hierarchy —Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the marketplace as discussed below: • Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. • Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. • Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. 127 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The fair value of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rose above the strike rates of the caps. Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (SOFR forward curves) and volatilities (Level 2 inputs). We also incorporate credit valuation adjustments (Level 3 inputs) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk. When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties, which we consider significant ( 10 % or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at December 31, 2024, the SOFR interest rate forward curve (Level 2 inputs) assumed a downtrend from 4.332 % to 3.913 % for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates. Investment in securities includes mortgage-backed securities. These securities are classified as available for sale and are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an external pricing vendor. Prices received from the vendor are analyzed based on various sources of observable market data. If prices are not within certain tolerance levels that are based on the asset type’s characteristics, the exception is researched and, if the price is not able to be validated, an alternate pricing vendor is utilized. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands): Quoted Market Prices (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total December 31, 2024 Assets CMBS $ — $ 41,535 $ — $ 41,535 (1) Derivative assets: Interest rate derivatives - caps $ — $ 356 $ — $ 356 (2) Total $ — $ 41,891 $ — $ 41,891 Quoted Market Prices (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total December 31, 2023 Assets Derivative assets: Interest rate derivatives - caps $ — $ 2,847 $ — $ 2,847 (2) $ — $ 2,847 $ — $ 2,847 Liabilities Derivative liabilities: Warrants $ — $ ( 12 ) $ — $ ( 12 ) (3) Net $ — $ 2,835 $ — $ 2,835 __________________ (1) Reported as “investment in securities” in our consolidated balance sheet. (2) Reported as “derivative assets” in our consolidated balance sheets. (3) Reported as “derivative liabilities” in our consolidated balance sheets 128 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Effect of Fair Value Measured Assets and Liabilities on Consolidated Statements of Operations The following table summarizes the effect of fair value measured assets and liabilities on our consolidated statements of operations (in thousands): Gain (Loss) Recognized in Income Year Ended December 31, 2024 2023 2022 Assets Derivative assets: Interest rate derivatives - caps $ 573 $ ( 935 ) $ 3,810 Total $ 573 $ ( 935 ) $ 3,810 Liabilities Derivative liabilities: Warrants $ 12 $ 272 $ 1,151 Net $ 585 $ ( 663 ) $ 4,961 Total combined Interest rate derivatives - caps $ ( 4,083 ) $ ( 8,685 ) $ 3,313 Warrants 12 272 1,151 Unrealized gain (loss) on derivatives $ ( 4,071 ) (1) $ ( 8,413 ) (1) $ 4,464 (1) Realized gain (loss) on interest rate caps 4,656 (1) (2) 7,750 (1) (2) 497 (1) (2) Net $ 585 $ ( 663 ) $ 4,961 ________ (1) Reported in “realized and unrealized gain (loss) on derivatives” in our consolidated statements of operations. (2) Represents settled and unsettled payments from counterparties on interest rate caps. At December 31, 2024, the amortized cost of the CMBS was $ 42.3 million. The unrealized gain (loss) that was recognized as a change in other comprehensive income (loss) was $( 744,000 ) for the year ended December 31, 2024. 11. Summary of Fair Value of Financial Instruments Determining the estimated fair values of certain financial instruments such as indebtedness requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled. 129 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The carrying amounts and estimated fair values of financial instruments were as follows (in thousands): December 31, 2024 December 31, 2023 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Financial assets measured at fair value: Investment in securities $ 41,535 $ 41,535 $ — $ — Derivative assets 356 356 2,847 2,847 Financial liabilities measured at fair value: Derivative liabilities $ — $ — $ 12 $ 12 Financial assets not measured at fair value: Cash and cash equivalents $ 135,465 $ 135,465 $ 85,599 $ 85,599 Restricted cash 49,592 49,592 80,904 80,904 Accounts receivable, net 31,754 31,754 39,199 39,199 Note receivable 8,283 8,283 — — Due from third-party hotel managers 22,873 22,873 17,739 17,739 Financial liabilities not measured at fair value: Indebtedness $ 1,222,003 $ 1,207,420 $ 1,171,459 $ 1,124,377 Accounts payable and accrued expenses 143,566 143,566 149,867 149,867 Dividends and distributions payable 9,255 9,255 9,158 9,158 Due to Ashford Inc. 4,267 4,267 1,471 1,471 Due to related parties, net 1,055 1,055 603 603 Due to third-party hotel managers 1,476 1,476 1,608 1,608 Cash, cash equivalents and restricted cash . These financial assets have maturities of less than 90 days and most bear interest at market rates. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique. Accounts receivable, net, due to/from related parties, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc and due to/from third-party hotel managers . The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique. Investment in securities . See note 10 for a complete description of the methodology and assumptions utilized in determining fair values. Note receivable. The carrying amount of note receivable approximates its fair value. We estimate the fair value of the note receivable to approximate the carrying value of $ 8.3 million at December 31, 2024. This is considered a Level 2 valuation technique. Derivative assets and derivative liabilities . See notes 9 and 10 for a complete description of the methodology and assumptions utilized in determining fair values. Indebtedness, net. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. We estimated the fair value of the total indebtedness to be approximately 98.8 % of the carrying value of $ 1.2 billion at December 31, 2024, and approximately 96.0 % of the carrying value of $ 1.2 billion at December 31, 2023. These fair value estimates are considered a Level 2 valuation technique. 130 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. Income (Loss) Per Share The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts): Year Ended December 31, 2024 2023 2022 Net income (loss) attributable to common stockholders - basic and diluted: Net income (loss) attributable to the Company $ ( 1,693 ) $ ( 27,017 ) $ 17,761 Less: dividends on preferred stock ( 40,295 ) ( 42,304 ) ( 21,503 ) Less: deemed dividends on preferred stock ( 8,958 ) ( 4,719 ) ( 6,954 ) Less: dividends on common stock ( 13,302 ) ( 13,164 ) ( 5,598 ) Less: dividends on unvested performance stock units ( 99 ) ( 226 ) ( 36 ) Add: claw back of dividends on cancelled performance stock units — — 7 Less: dividends on unvested restricted shares — ( 33 ) ( 38 ) Undistributed net income (loss) allocated to common stockholders ( 64,347 ) ( 87,463 ) ( 16,361 ) Add back: dividends on common stock 13,302 13,164 5,598 Distributed and undistributed net income (loss) - basic and diluted $ ( 51,045 ) $ ( 74,299 ) $ ( 10,763 ) Weighted average common shares outstanding: Weighted average common shares outstanding – basic and diluted 66,500 65,989 69,687 Income (loss) per share - basic and diluted: Net income (loss) allocated to common stockholders per share $ ( 0.77 ) $ ( 1.13 ) $ ( 0.15 ) Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands): Year Ended December 31, 2024 2023 2022 Net income (loss) allocated to common stockholders is not adjusted for: Income (loss) allocated to unvested restricted shares $ — $ 33 $ 38 Income (loss) allocated to unvested performance stock units 99 226 30 Income (loss) attributable to redeemable noncontrolling interests in operating partnership ( 4,472 ) ( 5,230 ) ( 476 ) Dividends on preferred stock - Series B 4,233 4,233 4,233 Interest expense on Convertible Senior Notes 4,503 4,470 4,435 Dividends on preferred stock - Series E (inclusive of deemed dividends) 38,089 34,817 18,969 Dividends on preferred stock - Series M (inclusive of deemed dividends) 3,631 4,673 1,955 Total $ 46,083 $ 43,222 $ 29,184 Weighted average diluted shares are not adjusted for: Effect of unvested restricted shares — 3 39 Effect of unvested performance stock units 25 273 — Effect of assumed conversion of operating partnership units 6,421 5,487 5,907 Effect of assumed conversion of preferred stock - Series B 4,116 4,116 4,116 Effect of contingently issuable shares — — 1 Effect of assumed conversion of Convertible Senior Notes 15,184 13,609 13,609 Effect of assumed conversion of preferred stock - Series E 150,154 126,832 34,730 Effect of assumed conversion of preferred stock - Series M 15,961 14,740 3,366 Total 191,861 165,060 61,768 13. Redeemable Noncontrolling Interests in Operating Partnership Redeemable noncontrolling interests in the operating partnership represent the limited partners’ proportionate share of equity and their allocable share of equity in earnings/losses of Braemar OP, which is an allocation of net income/loss attributable to the common unitholders based on the weighted average ownership percentage of these limited partners’ common units of limited partnership interest in the operating partnership (the “common units”) and units issued under our Long-Term Incentive Plan (the “LTIP units”) that are vested. Each common unit may be redeemed, by the holder, for either cash or, at our 131 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) sole discretion, up to one share of our REIT common stock, which is either: (i) issued pursuant to an effective registration statement; (ii) included in an effective registration statement providing for the resale of such common stock; or (iii) issued subject to a registration rights agreement. LTIP units, which are issued to certain executives and employees of Ashford LLC as compensation, generally have vesting periods of three years . Additionally, certain independent members of the board of directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant. Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election, settled in our common stock. An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of our operating partnership at a time when our stock is trading at a level in excess of the price it was trading on the date of the LTIP issuance. More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of our operating partnership; or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for our operating partnership. The compensation committee of the board of directors of the Company may authorize the issuance of Performance LTIP units to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of Performance LTIP units that will be settled in common units of Braemar OP, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date. The performance awards will be eligible to vest, from 0 % to 200 % of target, based on achievement of certain performance targets over the three-year performance period. The performance criteria are based on performance conditions under the relevant literature. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the applicable measurement date fair value of the award. The grant date fair value of the award may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period. During the year ended 2024, Performance LTIPs granted in 2022, vested at 174 % of target based on the performance conditions met over the performance period. As of December 31, 2024, there were approximately 353,000 unvested Performance LTIP units, representing 200 % of the target, outstanding. As of December 31, 2024, we have issued a total of approximately 1.8 million LTIP and Performance LTIP units, net of Performance LTIP cancellations. All LTIP and Performance LTIP units, other than approximately 623,000 LTIP units and 353,000 Performance LTIP units issued from March 2015 to December 2024, had reached full economic parity with, and are convertible into, common units. The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding approximate ownership percentage of our operating partnership: December 31, 2024 December 31, 2023 Redeemable noncontrolling interests in Braemar OP (in thousands) $ 29,964 $ 32,395 Adjustments to redeemable noncontrolling interests (1) (in thousands) $ 1,324 $ 66 Ownership percentage of operating partnership 8.05 % 6.63 % ____________________________________ (1) Reflects the excess of the redemption value over the accumulated historical cost. We allocated net (income) loss to the redeemable noncontrolling interests as illustrated in the table below (in thousands): Year Ended December 31, 2024 2023 2022 Net (income) loss attributable to redeemable noncontrolling interests in operating partnership $ 4,472 $ 5,230 $ 476 Distributions declared to holders of common units, LTIP units and Performance LTIP units 1,397 1,444 665 Performance LTIP dividend claw back upon cancellation — — ( 4 ) 132 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following table presents compensation expense for Performance LTIP units and LTIP units (in thousands): Year Ended December 31, Type Line Item 2024 2023 2022 Performance LTIP units Advisory services fee $ 1,842 $ 4,445 $ 4,301 LTIP units Advisory services fee 209 1,039 1,229 LTIP units Corporate, general and administrative 3 14 28 LTIP units - independent directors Corporate, general and administrative 154 182 252 Total $ 2,208 $ 5,680 $ 5,810 The unamortized cost of the unvested Performance LTIP units of approximately $ 77,000 at December 31, 2024 will be expensed over a period of 1.0 year with a weighted average period of 1.0 year. A summary of the activity of the units in our operating partnership is as follows (in thousands): Year Ended December 31, 2024 2023 2022 Units outstanding at beginning of year 7,224 8,283 7,158 LTIP units issued 151 44 44 Performance LTIP units issued — 353 1,194 Units redeemed for shares of common stock — ( 1,456 ) — Performance LTIP units cancelled ( 155 ) — ( 113 ) Units outstanding at end of year 7,220 7,224 8,283 Units convertible/redeemable at end of year 6,244 4,292 5,841 The following table presents the common units redeemed for cash (in thousands): Year Ended December 31, 2024 2023 2022 Units redeemed — 1,456 — Cash value of common units redeemed $ — $ 7,162 (1) $ — ____________________________________ (1) Includes Mr. Monty J. Bennett’s 1.4 million common units redeemed for cash of approximately $ 7.0 million during February 2023. 14. Equity Common Stock Dividends —The following table summarizes the common stock dividends declared during the period (in thousands): Year Ended December 31, 2024 2023 2022 Common stock dividends declared $ 13,401 $ 13,423 $ 5,665 8.25 % Series D Cumulative Preferred Stock —At December 31, 2024 and 2023, there were 1.6 million shares of 8.25 % Series D cumulative preferred stock outstanding. The Series D cumulative preferred stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B cumulative convertible preferred stock) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs. Series D cumulative preferred stock has no maturity date, and we are not required to redeem the shares at any time. Series D cumulative preferred stock is redeemable at our option for cash (on or after November 20, 2023), in whole or from time to time in part, at a redemption price of $ 25.00 per share plus accrued and unpaid dividends, if any, at the redemption date. Series D cumulative preferred stock may be converted into shares of our common stock, at the option of the holder, in certain limited circumstances such as a change of control. Each share of Series D cumulative preferred stock is convertible into a maximum 5.12295 shares of our common stock. The actual number is based on a formula as defined in the Series D cumulative preferred stock agreement (unless the Company exercises its right to redeem the Series D cumulative preferred shares for cash, for a limited period upon a 133 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) change in control). The necessary conditions to convert the Series D cumulative preferred stock to common stock have not been met as of period end. Therefore, Series D cumulative preferred stock will not impact our earnings per share. Series D cumulative preferred stock quarterly dividends are set at the rate of 8.25 % of the $ 25.00 liquidation preference (equivalent to an annual dividend rate of $ 2.0625 per share). In general, Series D cumulative preferred stockholders have no voting rights. The Series D Preferred Stock dividend for all issued and outstanding shares is set at $ 2.0625 per annum per share. The following table summarizes dividends declared (in thousands): Year Ended December 31, 2024 2023 2022 Series D Cumulative Preferred Stock $ 3,300 $ 3,300 $ 3,300 Stock Repurchases —On May 3, 2024, the 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. As of December 31, 2024, the Company has not repurchased any common stock pursuant to this program. We repurchased approximately 170,000 , 83,000 and 262,000 shares of our common stock in 2024, 2023 and 2022, respectively, to satisfy employees’ statutory minimum U.S. federal income tax obligations in connection with vesting of equity grants issued under our stock-based compensation plan. Noncontrolling Interest in Consolidated Entities —A partner has a noncontrolling ownership interest of 25 % in one hotel property with a total carrying value of $( 3.4 ) million and two hotel properties with a total carrying value of $( 8.9 ) million at December 31, 2024 and 2023, respectively. The following table summarizes the (income) loss allocated to the noncontrolling interest in consolidated entities (in thousands): Year Ended December 31, 2024 2023 2022 (Income) loss from consolidated entities attributable to noncontrolling interests $ ( 25,928 ) $ ( 1,619 ) $ ( 2,063 ) 15. Redeemable Preferred Stock 5.50 % Series B Cumulative Convertible Preferred Stock Each share of our 5.50 % Series B Cumulative Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) is convertible at any time, at the option of the holder, into a number of whole shares of common stock at a conversion price of $ 18.70 (which represents a conversion rate of 1.3372 shares of our common stock, subject to certain adjustments). The Series B Convertible Preferred Stock is also subject to conversion upon certain events constituting a change of control. Holders of the Series B Convertible Preferred Stock have no voting rights, subject to certain exceptions. The Series B Convertible Preferred Stock dividend for all issued and outstanding shares is set at $ 1.375 per annum per share. The Company may, at its option, cause the Series B Convertible Preferred Stock to be converted in whole or in part, on a pro-rata basis, into fully paid and nonassessable shares of the Company’s common stock at the conversion price, provided that the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110 % of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion. Additionally, the Series B Convertible Preferred Stock contains cash redemption features that consist of: 1) an optional redemption in which on or after June 11, 2020, the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $ 25.00 per share, plus any accumulated, accrued and unpaid dividends; 2) a special optional redemption, in which on or prior to the occurrence of a Change of Control (as defined in the Articles Supplementary), the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $ 25.00 per share; and 3) a “REIT Termination Event” and “Listing Event Redemption,” in which at any time (i) a REIT Termination Event (as defined below) occurs or (ii) the Company’s common stock fails to be listed on the NYSE, NYSE American, or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor thereto (each, a “National Exchange”), the holder of Series B Convertible Preferred Stock shall have the right to require the Company to 134 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) redeem any or all shares of Series B Convertible Preferred Stock at 103 % of the liquidation preference ($ 25.00 per share, plus any accumulated, accrued, and unpaid dividends) in cash. A “REIT Termination Event,” shall mean the earliest of: (i) filing of a federal income tax return where the Company does not compute its income as a REIT; (ii) stockholders’ approval on ceasing to be qualified as a REIT; (iii) board of directors’ approval on ceasing to be qualified as a REIT; (iv) board’s determination based on the advice of counsel to cease to be qualified as a REIT; or (v) determination within the meaning of Section 1313(a) of the Code to cease to be qualified as a REIT. On December 4, 2019, we entered into equity distribution agreements with certain sales agents to sell from time to time shares of our Series B Convertible Preferred Stock having an aggregate offering price of up to $ 40.0 million. Sales of shares of our Series B Convertible Preferred Stock may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the NYSE, the existing trading market for our Series B Convertible Preferred Stock, or sales made to or through a market maker other than on an exchange or through an electronic communications network. We will pay each of the sales agents a commission, which in each case shall not be more than 2.0 % of the gross sales price of the shares of our Series B Convertible Preferred Stock sold through such sales agents. As of December 31, 2024, we have sold approximately 65,000 shares of our Series B Convertible Preferred Stock and received proceeds of approximately $ 1.2 million under this program. Series B Convertible Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside our control. As such, the Series B Convertible Preferred Stock is classified outside of permanent equity. The following table summarizes dividends declared (in thousands): Year Ended December 31, 2024 2023 2022 Series B Convertible Preferred Stock $ 4,233 $ 4,233 $ 4,233 Series E Redeemable Preferred Stock On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell, from time to time, shares of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”). Pursuant to such equity distribution agreements, the Company offered a maximum of 20,000,000 shares of Series E Preferred Stock in a primary offering at a price of $ 25.00 per share. On February 21, 2023, the Company announced the closing of its Series E Preferred Stock offering. The Company is also offering a maximum of 8,000,000 shares of the Series E Preferred Stock pursuant to a dividend reinvestment plan (the “DRIP”) at $ 25.00 per share (the “Stated Value”). The Series E Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred stock, the Series D Preferred Stock and the Series M Preferred Stock (as defined below)) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs. Holders of the Series E Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class. If and whenever dividends on any shares of the Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive, the number of directors then constituting the board shall be increased by two and the holders of such shares of Series E Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series E Preferred Stock) shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms. Each share is redeemable at any time, at the option of the holder, at a redemption price of $ 25.00 per share, plus any accumulated, accrued and unpaid dividends, less a redemption fee. Starting on the second anniversary, each share is redeemable at any time, at the option of the Company, at a redemption price of $ 25.00 per share, plus any accumulated, accrued and unpaid dividends (with no redemption fee). The Series E Preferred Stock is also subject to conversion upon certain events constituting 135 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) a change of control. Upon such change of control events, holders have the option to convert their shares of Series E Preferred Stock into a maximum of 5.69476 shares of our common stock. The redemption fee shall be an amount equal to: • 8.0 % of the stated value of $ 25.00 per share (the “Stated Value”) beginning on the Original Issue Date (as defined in the Articles Supplementary) of the shares of the Series E Preferred Stock to be redeemed; • 5.0 % of the Stated Value beginning on the second anniversary from the Original Issue Date of the shares of the Series E Preferred Stock to be redeemed; and • 0 % of the Stated Value beginning on the third anniversary from the Original Issue Date of the shares of the Series E Preferred Stock to be redeemed. The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal number of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption. The Series E Preferred Stock cash dividends are as follows: • 8.00 % per annum of the Stated Value beginning on the date of the first settlement of the Series E Preferred Stock (the “Date of Initial Closing”); • 7.75 % per annum of the Stated Value beginning on the first anniversary from the Date of Initial Closing; and • 7.50 % per annum of the Stated Value beginning on the second anniversary from the Date of Initial Closing. Dividends are payable on a monthly basis in arrears on the 15th day of each month (or, if such payment date is not a business day, the next succeeding business day) to holders of record at the close of business on the last business day of each month immediately preceding the applicable dividend payment date. Dividends will be computed on the basis of twelve 30-day months and a 360-day year. The Company has a DRIP that allows participating holders to have their Series E Preferred Stock dividend distributions automatically reinvested in additional shares of the Series E Preferred Stock at a price of $ 25.00 per share. The issuance activity of the Series E Preferred Stock is summarized below (in thousands): Year Ended December 31, 2024 2023 2022 Series E Preferred Stock shares issued (1) — 3,798 10,914 Net proceeds (1) $ — $ 85,444 $ 245,575 __________________ (1) Exclusive of shares issued under the DRIP. The Series E Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside of the Company’s control. As such, the Series E Preferred Stock is classified outside of permanent equity. At the date of issuance, the carrying amount of the Series E Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be adjusted to the redemption amount each reporting period. The redemption value adjustment of Series E Preferred Stock is summarized below (in thousands): December 31, 2024 December 31, 2023 Series E Preferred Stock $ 352,502 $ 377,035 Cumulative adjustments to Series E Preferred Stock (1) $ 22,098 $ 13,337 ________ (1) Reflects the excess of the redemption value over the accumulated carrying value. 136 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following table summarizes dividends declared (in thousands): Year Ended December 31, 2024 2023 2022 Series E Preferred Stock $ 29,328 $ 30,883 $ 12,694 The redemption activities of Series E Preferred Stock is summarized below (in thousands): Year Ended December 31, 2024 2023 2022 Series E Preferred Stock shares redeemed 1,535 272 14 Redemption amount, net of redemption fees $ 36,554 $ 6,423 $ 365 Series M Redeemable Preferred Stock On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell, from time to time, shares of the Series M Redeemable Preferred Stock (the “Series M Preferred Stock”). Pursuant to such equity distribution agreements, the Company offered a maximum of 20,000,000 shares of the Series M Preferred Stock (par value $ 0.01 ) in a primary offering at a price of $ 25.00 per share (or “Stated Value”). On February 21, 2023, the Company announced the closing of its Series M Preferred Stock offering. The Company is also offering a maximum of 8,000,000 shares of Series M Preferred Stock pursuant to the DRIP at $ 25.00 per share. The Series M Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs. Holders of the Series M Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class. If and whenever dividends on any shares of Series M Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive, the number of directors then constituting the board shall be increased by two and the holders of such shares of Series M Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series M Preferred Stock) shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms. Each share is redeemable at any time, at the option of the holder, at a redemption price of $ 25.00 per share, plus any accumulated, accrued and unpaid dividends, less a redemption fee. Starting on the second anniversary, each share is redeemable at any time, at the option of the Company, at a redemption price of $ 25.00 per share, plus any accumulated, accrued and unpaid dividends (with no redemption fee). The Series M Preferred Stock is also subject to conversion upon certain events constituting a change of control. Upon such change of control events, holders have the option to convert their shares of Series M Preferred Stock into a maximum of 5.69476 shares of our common stock. The redemption fee shall be an amount equal to: • 1.5 % of the Stated Value of $ 25.00 per share beginning on the Series M Original Issue Date (as defined in the Articles Supplementary) of the shares of Series M Preferred Stock to be redeemed; and • 0 % of the Stated Value beginning on the first anniversary from the Series M Original Issue Date of the shares of Series M Preferred Stock to be redeemed. The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal number of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption. Holders of Series M Preferred Stock are entitled to receive cumulative cash dividends at the initial rate of 8.2 % per annum of the Stated Value of $ 25.00 per share (equivalent to an annual dividend rate of $ 2.05 per share). Beginning one year from the date of original issuance of each share of Series M Preferred Stock and on each one-year anniversary thereafter for such share of Series M Preferred Stock, the dividend rate shall increase by 0.10 % per annum; provided, however, that the dividend rate for any share of Series M Preferred Stock shall not exceed 8.7 % per annum of the Stated Value. 137 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Dividends are payable on a monthly basis and in arrears on the 15th day of each month (or, if such payment date is not a business day, on the next succeeding business day) to holders of record at the close of business on the last business day of each month immediately preceding the applicable dividend payment date. Dividends will be computed on the basis of twelve 30-day months and a 360-day year. The Company has a DRIP that allows participating holders to have their Series M Preferred Stock dividend distributions automatically reinvested in additional shares of the Series M Preferred Stock at a price of $ 25.00 per share. The issuance activity of Series M Preferred Stock is summarized below (in thousands): Year Ended December 31, 2024 2023 2022 Series M Preferred Stock shares issued (1) — 531 1,402 Net proceeds (1) $ — $ 12,869 $ 34,009 __________________ (1) Exclusive of shares issued under the DRIP. The Series M Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside the Company’s control. As such, the Series M Preferred Stock is classified outside of permanent equity. At the date of issuance, the carrying amount of the Series M Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be adjusted to the redemption amount each reporting period. The redemption value adjustment of Series M Preferred stock is summarized below (in thousands): December 31, 2024 December 31, 2023 Series M Preferred Stock $ 36,916 $ 45,623 Cumulative adjustments to Series M Preferred Stock (1) $ 1,794 $ 1,597 __________________ (1) Reflects the excess of the redemption value over the accumulated carrying value. The following table summarizes dividends declared (in thousands): Year Ended December 31, 2024 2023 2022 Series M Preferred Stock $ 3,434 $ 3,888 $ 1,276 The redemption activities of Series M Preferred Stock is summarized below (in thousands): Year Ended December 31, 2024 2023 2022 Series M Preferred Stock shares redeemed 362 137 5 Redemption amount, net of redemption fees $ 9,047 $ 3,395 $ 134 16. Stock-Based Compensation Under the 2013 Equity Incentive Plan, as amended, we are authorized to grant 8.2 million restricted stock or performance stock units of our common stock as incentive stock awards. At December 31, 2024, approximately 920,000 shares were available for future issuance under the 2013 Equity Incentive Plan. Restricted Stock —We incur stock-based compensation expense in connection with restricted stock awarded to certain employees of Ashford LLC and its affiliates. We also issue common stock to certain of our independent directors, which vests immediately upon issuance. 138 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following table summarizes the stock-based compensation expense for restricted stock (in thousands): Year Ended December 31, Line Item 2024 2023 2022 Advisory services fee $ 216 $ 1,162 $ 2,195 Management fees 2 11 26 Corporate general and administrative 14 101 126 Corporate general and administrative - independent directors 144 182 252 $ 376 $ 1,456 $ 2,599 A summary of our restricted stock activity is as follows (shares in thousands): Year Ended December 31, 2024 2023 2022 Number of Units Weighted Average Price at Grant Number of Units Weighted Average Price at Grant Number of Units Weighted Average Price at Grant Outstanding at beginning of year 167 $ 7.02 437 $ 6.46 957 $ 6.94 Restricted shares granted 50 2.82 45 4.07 45 5.63 Restricted shares vested ( 216 ) 6.04 ( 312 ) 5.82 ( 543 ) 5.86 Restricted shares forfeited ( 1 ) 7.02 ( 3 ) 6.90 ( 22 ) 6.77 Outstanding at end of year — $ — 167 $ 7.02 437 $ 6.46 The fair value of restricted stock vested during the years ended December 31, 2024, 2023 and 2022 was approximately $ 452,000 , $ 1.3 million and $ 3.1 million, respectively. Performance Stock Units —The compensation committee of the board of directors of the Company may authorize the issuance of grants of performance stock units (“PSUs”) to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date. The compensation committee utilizes a performance metric, pursuant to which, the performance awards will be eligible to vest, from 0 % to 200 % of target, based on achievement of certain performance targets over the three-year performance period. The performance criteria are based on performance conditions under the relevant literature and were issued to non-employees. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the corresponding measurement date fair value of the award, which may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period. During the year ended December 31, 2024, PSUs granted in 2022, vested at 174 % of target based on the performance conditions met over the performance period. During the year ended December 31, 2023, PSUs granted in 2021, vested at 200 % of target based on the performance conditions met over the performance period. During the year ended December 31, 2022, 225,000 PSUs granted in 2020, were canceled due to the market condition criteria not being met. As a result there was a claw back of the previously declared dividends in the amount of $ 7,000 . The following table summarizes the compensation expense for PSUs (in thousands): Year Ended December 31, Line Item 2024 2023 2022 Advisory services fee $ 27 $ 2,108 2,876 At December 31, 2024, the unamortized cost of unvested PSUs was $ 168,000 , which is expected to be recognized over a period of 1.0 year with a weighted average period of 1.0 year. 139 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) A summary of our PSU activity is as follows (shares in thousands): Year Ended December 31, 2024 2023 2022 Number of Units Weighted Average Price at Grant Number of Units Weighted Average Price at Grant Number of Units Weighted Average Price at Grant Outstanding at beginning of year 424 $ 4.22 335 $ 5.84 671 $ 5.84 PSUs granted (at target) — — 383 4.07 41 5.63 PSUs vested (at target) ( 41 ) 5.63 ( 294 ) 7.01 ( 152 ) 4.69 PSUs canceled — — — — ( 225 ) 3.51 Outstanding at end of year (at target) 383 $ 4.07 424 $ 4.22 335 $ 5.84 17. Related Party Transactions Ashford Inc. Advisory Agreement Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor. Our chairman, Mr. Monty Bennett, also serves as chairman of the board of directors and chief executive officer of Ashford Inc. Under our advisory agreement, we pay advisory fees to Ashford LLC. We pay a monthly base fee equal to 1/12 of the sum of (i) 0.70 % of the total market capitalization of our company for the prior month, plus (ii) the Net Asset Fee Adjustment (as defined in our advisory agreement), if any, on the last day of the prior month during which our advisory agreement was in effect; provided, however, in no event shall the base fee for any month be less than the minimum base fee as provided by our advisory agreement. The base fee is payable on the fifth business day of each month. The minimum base fee for Braemar for each month will be equal to the greater of: ▪ 90 % of the base fee paid for the same month in the prior year; and ▪ 1/12 of the G&A Ratio (as defined) multiplied by the total market capitalization of Braemar. We are also required to pay Ashford LLC an incentive fee that is measured annually (or for a stub period if the advisory agreement is terminated at other than year-end). Each year that our annual total stockholder return exceeds the average annual total stockholder return for our peer group, we pay Ashford LLC an incentive fee over the following three years , subject to the Fixed Charge Coverage Ratio (“FCCR”) Condition, as defined in the advisory agreement, which relates to the ratio of adjusted EBITDA to fixed charges. We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, risk management advisory and asset management services, as specified in the advisory agreement. We also recorded equity-based compensation expense for equity grants of common stock, PSUs and LTIP units awarded to officers and employees of Ashford LLC in connection with providing advisory services. The following table summarizes the advisory services fees incurred (in thousands): Year Ended December 31, 2024 2023 2022 Advisory services fee Base advisory fee $ 13,838 $ 13,982 $ 12,790 Reimbursable expenses (1) 11,620 8,353 4,653 Equity-based compensation (2) 2,294 8,754 10,601 Incentive fee 2,735 — 803 Total $ 30,487 $ 31,089 $ 28,847 ________ (1) Reimbursable expenses include overhead, internal audit, risk management advisory, asset management services and deferred cash awards. (2) Equity-based compensation is associated with equity grants of Braemar’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC. 140 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) On September 27, 2022, an agreement was entered into by Ashford Inc., Ashford Trust and Braemar pursuant to which the Advisor is to implement the REITs’ cash management strategies. This includes actively managing the REITs excess cash by primarily investing in short-term U.S. Treasury securities. The annual fee is equal to the lesser of (i) 20 bps of the average daily balance of the funds managed by the Advisor and (ii) the actual rate of return realized by the cash management strategies; provided that in no event will the cash management fee be less than zero. The fee is payable monthly in arrears. On March 2, 2023, the Company entered into a Limited Waiver Under Advisory Agreement (the “2023 Limited Waiver”) with Braemar OP, Braemar TRS and its Advisor. Pursuant to the 2023 Limited Waiver, the Company, Braemar OP, Braemar TRS and the Company’s Advisor waived the operation of any provision in the advisory agreement that would otherwise limit our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2023, cash incentive compensation to employees and other representatives of the Advisor. On March 11, 2024, we entered into a Limited Waiver Under Advisory Agreement with Ashford Inc. and Ashford LLC (the “Advisory Agreement Limited Waiver”). Pursuant to the Advisory Agreement Limited Waiver, the Company, the Operating Partnership, TRS and the Advisor waive the operation of any provision in our advisory agreement that would otherwise limit the ability of the Company in its discretion, at the Company’s cost and expense, to award during calendar year 2024, cash incentive compensation to employees and other representatives of the Advisor. Pursuant to the Company’s hotel management agreements with each hotel management company, the Company bears the economic burden for casualty insurance coverage. Under the advisory agreement, Ashford Inc. secures casualty insurance policies to cover Ashford Trust, Braemar, Stirling OP, their hotel managers, as needed, and Ashford Inc. The total loss estimates included in such policies are based on the collective pool of risk exposures from each party. Ashford Inc. has managed the casualty insurance program and beginning in December 2023, Warwick Insurance Company (“Warwick”), a subsidiary of Ashford Inc., provides and manages the general liability, workers’ compensation and business automobile insurance policies within the casualty insurance program. Each year Ashford Inc. collects funds from Ashford Trust, Braemar, Stirling OP and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis . Lismore We engage Lismore or its subsidiaries to provide debt placement services and assist with loan modifications or refinancings on our behalf and brokerage services. For the year ended December 31, 2024, 2023 and 2022, we incurred fees from Lismore or its subsidiaries of $ 2.8 million, $ 2.4 million and $ 1.4 million, respectively. Ashford Securities On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by Ashford Inc., Ashford Trust and Braemar (collectively, the “Parties” and each individually, a “Party”) with respect to funding certain expenses of Ashford Securities LLC, a subsidiary of Ashford Inc. (“Ashford Securities”). Beginning on the effective date of the Amended and Restated Contribution Agreement, costs were allocated based upon an allocation percentage of 50 % to Ashford Inc., 50 % to Braemar and 0 % to Ashford Trust. Upon reaching the earlier of $ 400 million in aggregate capital raised, or June 10, 2023, there was to be a true-up (the “Amended and Restated True-Up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual amount contributed by each company was based on the actual amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively, through Ashford Securities (the resulting ratio of contributions among the Parties, the “Initial True-up Ratio”). On January 27, 2022, Ashford Trust, Braemar and Ashford Inc. entered into a Second Amended and Restated Contribution Agreement which provided for an additional $ 18 million in expenses to be reimbursed, with all expenses allocated 45 % to Ashford Trust, 45 % to Braemar and 10 % to Ashford Inc. On February 1, 2023, Braemar entered into a Third Amended and Restated Contribution Agreement, which provided that after the Amended and Restated True-Up Date, capital contributions for the remainder of fiscal year 2023 would be divided between each Party based on the Initial True-Up Ratio, there would be a true up reflecting amounts raised by Ashford Securities since June 10, 2019, and thereafter, the capital contributions would be divided among each Party in accordance with the cumulative ratio of capital raised by the Parties. Effective January 1, 2024, Braemar entered into a Fourth Amended and Restated Contribution Agreement with Ashford Inc. and Ashford Trust, which states that, notwithstanding anything in the prior contribution agreements: (1) the Parties equally 141 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) split responsibility for all aggregate contributions made by them to Ashford Securities through September 30, 2021; and (2) thereafter, their contributions for each quarter will be based on the ratio of the amounts raised by each Party through Ashford Securities in the prior quarter compared to the total aggregate amount raised by the Parties through Ashford Securities for the prior quarter. To the extent contributions made by any of the Parties through December 31, 2023 differed from the amounts owed pursuant to the foregoing, the Parties shall make true up payments to each other to settle the difference. During the first quarter of 2024, the funding requirement was revised based on the aggregate capital raised through Ashford Securities. This resulted in Braemar receiving a payment of approximately $ 5.9 million from Ashford Inc., which resulted in net credit to expense of approximately $ 4.5 million that is included in “corporate general and administrative” on the consolidated statements of operations for the year ended December 31, 2024. As of December 31, 2023, Braemar had funded approximately $ 20.9 million and had a pre-funded balance of approximately $ 693,000 included in “other assets” and a receivable of approximately $ 3.5 million included in “due to Ashford Inc., net” on the consolidated balance sheet. During the first quarter of 2024, there was also a true-up of the capital contributions in accordance with the Third Amended and Restated Contribution Agreement made through December 31, 2023, which resulted in a payment of $ 3.5 million from Ashford Inc. As of December 31, 2024, Braemar has funded approximately $ 12.9 million and has a pre-funded balance of $ 797,000 that is included in “other assets” on the consolidated balance sheet. The table below summarizes the amount Braemar has expensed related to reimbursed operating expenses of Ashford Securities (in thousands): Year Ended December 31, Line Item 2024 2023 2022 Corporate, general and administrative $ ( 4,547 ) $ 4,330 $ 9,461 Design and Construction Services Premier Project Management LLC (“Premier”), a subsidiary of Ashford Inc., provides design and construction services to our hotels, including construction management, interior design, architectural services, and the purchasing, freight management and supervision of installation of FF&E and related services. Pursuant to the design and construction services agreement, we pay Premier: (a) design and construction fees of up to 4 % of project costs; and (b) for the following services: (i) architectural ( 6.5 % of total construction costs); (ii) construction management for projects without a general contractor ( 10 % of total construction costs); (iii) interior design ( 6 % of the purchase price of the FF&E designed or selected by Premier); and (iv) FF&E purchasing ( 8 % of the purchase price of FF&E purchased by Premier; provided that if the purchase price exceeds $ 2.0 million for a single hotel in a calendar year, then the purchasing fee is reduced to 6 % of the FF&E purchase price in excess of $ 2.0 million for such hotel in such calendar year). Such fees are payable monthly as the service is delivered based on percentage complete, as reasonably determined by Premier for each service, or payable as set forth in other agreements. Hotel Management Services At December 31, 2024, Remington Hospitality managed four of our 15 hotel properties. We pay monthly hotel management fees equal to the greater of approximately $ 17,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, as well as annual incentive management fees, if certain operational criteria were met, and other general and administrative expense reimbursements primarily related to accounting services. Our hotel management agreement also requires that we fund property-level operating costs including the hotel manager's payroll and related costs. 142 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Summary of Transactions In accordance with our advisory agreement, our Advisor, or entities in which our Advisor has an interest, has a right to provide products or services to our hotel properties, provided such transactions are evaluated and approved by our independent directors. The following tables summarize the entities in which our Advisor has an interest with which we or our hotel properties contracted for products and services, the amounts recorded by us for those services and the applicable classification on our consolidated financial statements (in thousands): Year Ended December 31, 2024 Company Product or Service Total Investments in Hotel Properties, net (1) Indebtedness, net (2) Other Assets Other Hotel Revenue Other Hotel Expenses Management fees Property Taxes, Insurance and Other Advisory Services Fee Interest Income Corporate General and Administrative Write-off of Premiums, Loan Costs and Exit Fees Ashford LLC Insurance claims services $ 2 $ — $ — $ — $ — $ — $ 2 $ — $ — $ — $ — Ashford Securities Broker/Dealer ( 4,473 ) — — — — — — — — — ( 4,473 ) — INSPIRE Audio visual services 4,525 — — — 4,415 — — — — — 110 — Lismore Capital Debt placement and related services 2,799 — 1,112 75 — — — — — — — 1,612 OpenKey Mobile key app 36 — — — — 36 — — — — — — Premier Design and construction services 15,886 14,133 — — — 363 — — 1,390 — — — Pure Wellness Hypoallergenic premium rooms 146 — — — — 146 — — — — — — RED Leisure Watersports activities and travel/transportation services 1,119 — — — 336 713 — — — — 70 — Warwick Insurance 1,291 — — — — 50 — 1,241 — — — — Ashford LLC Cash management services ( 91 ) — — — — — — — — ( 91 ) — — Remington Hospitality Hotel management services (5) 4,089 — — — — 1,612 2,477 — — — — — Year Ended December 31, 2023 Company Product or Service Total Investments in Hotel Properties, net (1) Indebtedness, net (2) Other Assets (3) Preferred Stock (4) Other Hotel Revenue Other Hotel Expenses Management fees Property Taxes, Insurance and Other Advisory Services Fee Corporate General and Administrative Write-off of Premiums, Loan Costs and Exit Fees Ashford LLC Insurance claims services $ 3 $ — $ — $ — $ — $ — $ — $ — $ 3 $ — $ — $ — Ashford Securities Broker/Dealer 6,385 — — — 1,972 — — — — — 4,413 — INSPIRE Audio visual services 4,165 — — — — 4,268 — — — — 103 — Lismore Capital Debt placement and related services 2,426 — 987 150 — — — — — — — 1,289 OpenKey Mobile key app 41 — — — — — 41 — — — — — Premier Design and construction services 12,652 11,618 — — — — — — — 1,034 — — Pure Wellness Hypoallergenic premium rooms 149 — — — — — 149 — — — — — RED Leisure Watersports activities and travel/transportation services 427 — — — — 308 692 — — — 43 — Remington Hospitality Hotel management services (5) 3,913 — — — — — 1,394 2,519 — — — — Year Ended December 31, 2022 Company Product or Service Total Investments in Hotel Properties, net (1) Indebtedness, net (2) Other Hotel Revenue Other Hotel Expenses Management fees Preferred Stock (4) Property Taxes, Insurance and Other Advisory Services Fee Corporate General and Administrative Ashford LLC Insurance claims services $ 3 $ — $ — $ — $ — $ — $ — $ 3 $ — $ — Ashford Securities Broker/Dealer 9,735 — — — — — 274 — — 9,461 Ashford Securities Dealer Manager Fees 5,766 — — — — — 5,766 — — — INSPIRE Audio visual services 3,800 — — 3,800 — — — — — — Lismore Capital Debt placement and related services 750 — 750 — — — — — — — Lismore Capital Broker Services 637 — 637 — — — — — — — OpenKey Mobile key app 39 — — — 39 — — — — — Premier Design and construction services 9,875 9,262 — — — — — — 613 — Pure Wellness Hypoallergenic premium rooms 150 — — — 150 — — — — — RED Leisure Watersports activities and travel/transportation services 525 — — 236 761 — — — — — Remington Hospitality Hotel management services (5) 4,288 — — — 1,416 2,872 — — — — ________ (1) Recorded in FF&E and depreciated over the estimated useful life. (2) Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement. (3) Represents nonrefundable work fees. (4) Recorded as a reduction of Series E and Series M Redeemable Preferred Stock proceeds. (5) Other hotel expenses include incentive hotel management fees and other hotel management costs. 143 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following table summarizes the components of due to Ashford Inc. (in thousands): Due to (from) Ashford Inc. Company Product or Service December 31, 2024 December 31, 2023 Ashford LLC Advisory services $ 1,536 $ 1,004 Ashford LLC Casualty Insurance 1,044 608 Ashford LLC Insurance claims services — 1 INSPIRE Audio visual services 501 483 OpenKey Mobile key app — 5 Ashford Securities Contribution Agreement — ( 3,522 ) Ashford Securities Capital raise services 10 19 Premier Design and construction services 968 2,674 RED Leisure Watersports activities and travel/transportation services 208 199 $ 4,267 $ 1,471 As of December 31, 2024, due to related parties, net included a net payable to Remington Hospitality of $ 1.1 million. As of December 31, 2023, due from related parties, net included a net payable to Remington Hospitality of $ 603,000 . These amounts are primarily related to advances made by Braemar, accrued base and incentive management fees and casualty insurance premiums. 18. Commitments and Contingencies Restricted Cash —Under certain management and debt agreements for our hotel properties existing at December 31, 2024, escrow payments are required for insurance, real estate taxes and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 3 % to 5 % of gross revenues for capital improvements. Franchise Fees —We currently have one hotel property that operates under a franchise agreement with a 25-year term. The term begins upon the completion of conversion of the Cameo Beverly Hills. Under the terms of the agreement, we will pay (i) 3 % of gross rooms revenue for the preceding calendar month during the first three years of the agreement; (ii) 4 % of gross rooms revenue for the preceding calendar month during year four; and (iii) 5 % of the gross rooms revenue for the preceding calendar month for the remainder of the term. As of December 31, 2024, we are currently paying 3 % of gross revenues. The table below summarizes the franchise fees incurred (in thousands): Year Ended December 31, Line Item 2024 2023 2022 Other hotel expenses $ 340 $ — $ — Management Fees —Under hotel management agreements for our hotel properties existing at December 31, 2024, we pay a monthly hotel management fee equal to the greater of approximately $ 17,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, or in some cases, 3.0 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable. These management agreements expire from November 2029 through December 2065, with renewal options. If we terminate a management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term, liquidated damages or, in certain circumstances, we may substitute a new management agreement. Our hotel management agreements also require that we fund property-level operating costs including the hotel manager's payroll and related costs. Income Taxes —We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years 2020 through 2024 remain subject to potential examination by certain federal and state taxing authorities. Litigation —On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: (i) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (ii) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt-out of the class; however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. The opt-out period has been extended until such time that discovery has concluded. In May 2023, the trial court requested additional briefing from the parties to 144 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) determine whether the case should be maintained, dismissed, or the class de-certified. After submission of the briefs, the court requested that the parties submit stipulations for the court to rule upon. On February 13, 2024, the judge ordered the parties to submit additional briefing related to on-site breaks. A tentative settlement has been reached subject to the respective parties obtaining various approvals. As of December 31, 2024, the estimated settlement liability amount has been accrued. On June 8, 2022, a lawsuit was filed against various Hilton entities on behalf of a class of all hourly employees at all Hilton-branded managed properties in California, including Hilton La Jolla Torrey Pines. The complaint includes claims for unpaid wages, meal and rest break violations, and unreimbursed business expenses, along with various derivative claims including wage statement, final pay, and Private Attorneys General Act (“PAGA”) claims. On November 30, 2023, Hilton mediated this litigation, but it did not result in a settlement. At the end of the mediation, the mediator submitted a mediator’s proposal for approximately $ 3.5 million, to which the parties have since agreed to. The allocation to Hilton La Jolla Torrey Pines is approximately $ 401,000 , which was accrued as of December 31, 2024. On August 4, 2020, a lawsuit, Benjamin Zermeno v. Beverly Hills Marriott, was filed in Alameda County Superior Court as a PAGA representative action alleging various wage and hour violations of all Remington Hospitality managed California properties. The plaintiff’s individual claims were compelled to arbitration. On August 18, 2022, another lawsuit, Cristina Catalano v. Beverly Hills Marriott and Mr. C, was filed as a PAGA representative action alleging various wage and hour violations of all Remington Hospitality managed California properties. The co-defendant separately settled and the individual arbitration has also settled. A private mediation was held on December 27, 2024 to globally resolve the three outstanding matters. A tentative settlement was reached subject to the parties finalizing the agreement and court approval. As of December 31, 2024, the estimated settlement liability amount has been accrued. We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the Americans with Disabilities Act and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations or cash flow. During the quarter ended September 30, 2023, we had a cyber incident that resulted in the potential exposure of certain personal information. We have completed an investigation and have identified certain information that may have been exposed and notified potentially impacted individuals pursuant to applicable state guidelines. All systems have been restored. In February of 2024, two class action lawsuits were filed, one in the U.S. District Court for the Northern District of Texas and a second in the 68th District Court for Dallas County related to the cyber incident. The lawsuit filed in the 68th District Court was subsequently dismissed and refiled in the U.S. District Court for the Northern District of Texas. On March 12, 2024, the court ordered the two cases be consolidated. The consolidated case is currently pending in the U.S. District Court for the Northern District of Texas. The parties have reached an agreement, subject to final Court approval, to resolve the class action suit. The amount of the class settlement is approximately $ 485,000 . The hearing for final Court approval of the settlement is scheduled for August 27, 2025. Our assessment may change depending upon the development of any current or future legal proceedings, and the final results of such legal proceedings cannot be predicted with certainty. If we ultimately do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods. Leases —We lease land under one non-cancelable operating ground lease, which expires in 2065, related to our hotel property in Yountville, California. The lease in Yountville, California contains two 25 -year extension options. The lease is subject to base rent plus contingent rent based on the hotel property’s financial results and escalation clauses. Capital Commitments —At December 31, 2024, we had capital commitments of $ 29.1 million, including commitments that will be satisfied with insurance proceeds, relating to general capital improvements that are expected to be paid in the next twelve months . 19. Leases We have operating ground leases and operating equipment leases, such as copier and vehicle leases, at our hotel properties. Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years. The 145 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) exercise of lease renewal options is at our sole discretion. Some leases have variable payments, however, if variable payments are contingent, they are not included in the ROU assets and liabilities. We have no finance leases as of December 31, 2024. The discount rate used to calculate the lease liability and ROU asset related to our ground leases is based on our incremental borrowing rate (“IBR”), as the rate implicit in each lease is not readily determinable. The IBR is determined at commencement of the lease, or upon modification of the lease, as the interest rate a lessee would have to pay to borrow on a fully collateralized basis over a similar term and at an amount equal to the lease payments in a similar economic environment. As of December 31, 2024 and 2023, our leased assets and liabilities consisted of the following (in thousands): December 31, 2024 December 31, 2023 Assets Operating lease right-of-use assets $ 34,852 $ 78,383 Liabilities Operating lease liabilities $ 19,984 $ 60,379 We incurred the following lease costs related to our operating leases (in thousands): Year Ended December 31, Classification 2024 2023 2022 Operating lease cost (1) Hotel operating expenses - other $ 4,505 $ 6,757 $ 6,653 _______________________________________ (1) For the years ended December 31, 2024, 2023 and 2022, operating lease cost includes approximately $ 934,000 , $ 2.3 million and $ 2.2 million, respectively, of variable lease cost associated with the ground leases. Additionally, we recorded $ 451,000 , $ 474,000 and $ 474,000 , respectively, of amortization costs related to the intangible assets that were reclassified to “operating lease right-of-use assets” upon adoption of ASC 842. Short-term lease costs in aggregate are immaterial. Other information related to leases is as follows: Year Ended December 31, 2024 2023 2022 Supplemental Cash Flows Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases (in thousands) $ 3,288 $ 3,310 $ 3,307 Weighted Average Remaining Lease Term Operating leases (1) 41 years 43 years 44 years Weighted Average Discount Rate Operating leases (1) 5.25 % 4.98 % 4.98 % _______________________________________ (1) Calculated using the lease term, excluding extension options, and discount rates of the ground leases. Future minimum lease payments due under non-cancellable leases as of December 31, 2024 were as follows (in thousands): Operating Leases 2025 $ 1,216 2026 1,124 2027 1,132 2028 1,136 2029 1,129 Thereafter 52,152 Total future minimum lease payments (1) 57,889 Less: interest ( 37,905 ) Present value of operating lease liabilities $ 19,984 _______________________________________ (1) Based on payment amounts as of December 31, 2024 . 146 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 20. Income Taxes For U.S. federal income tax purposes, we elected to be taxed as a REIT under the Code. To qualify as a REIT, we must meet certain organizational and operational stipulations, including a requirement that we distribute at least 90% of our REIT taxable income, excluding net capital gains, to our stockholders. We currently intend to adhere to these requirements and maintain our REIT status. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes as well as to federal income and excise taxes on our undistributed taxable income. At December 31, 2024, 14 of our hotel properties were leased to TRS lessees and The Ritz-Carlton St. Thomas was owned by our USVI TRS. The TRS entities recognized net book income (loss) before income taxes of $ 9.6 million, $ 17.9 million and $ 25.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. The following table reconciles the income tax expense of the TRS entities at applicable statutory rates to the actual income tax expense recorded (in thousands): Year Ended December 31, 2024 2023 2022 Income tax (expense) benefit of the TRS entities at federal statutory income tax rate of 21% $ ( 2,040 ) $ ( 5,180 ) $ ( 6,463 ) State income tax (expense) benefit, net of U.S. federal income tax benefit ( 81 ) ( 258 ) ( 1,961 ) State and local income tax (expense) benefit on pass-through entity subsidiaries ( 27 ) ( 20 ) ( 17 ) Gross receipts and margin taxes ( 88 ) ( 52 ) ( 69 ) Benefit of USVI Economic Development Commission credit 1,559 1,511 3,358 Benefits of Puerto Rico tax incentives 950 2,064 1,474 Effect of permanent differences ( 412 ) ( 229 ) — Other 39 ( 46 ) 126 Valuation allowance ( 742 ) ( 479 ) ( 491 ) Total income tax (expense) benefit $ ( 842 ) $ ( 2,689 ) $ ( 4,043 ) The components of income tax expense are as follows (in thousands): Year Ended December 31, 2024 2023 2022 Current: Federal $ ( 387 ) $ ( 467 ) $ ( 3,745 ) State 68 ( 69 ) ( 247 ) Foreign ( 619 ) ( 824 ) — Total current income tax (expense) benefit ( 938 ) ( 1,360 ) ( 3,992 ) Deferred: Federal 1 ( 14 ) ( 51 ) State — — — Foreign 95 ( 1,315 ) — Total deferred income tax (expense) benefit 96 ( 1,329 ) ( 51 ) Total income tax (expense) benefit $ ( 842 ) $ ( 2,689 ) $ ( 4,043 ) The following table presents the U.S. and foreign earnings (losses) from continuing operations before income taxes (in thousands): Year Ended December 31, 2024 2023 2022 U.S. $ 6,549 $ ( 51,878 ) $ ( 3,859 ) Foreign 14,056 23,939 27,250 Total $ 20,605 $ ( 27,939 ) $ 23,391 147 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) For the years ended December 31, 2024, 2023 and 2022, income tax expense included interest and penalties paid to/(received from) taxing authorities of $ 4,000 , $( 11,000 ) and $ 1,000 , respectively. At December 31, 2024 and 2023, we determined that there were no amounts to accrue for interest and penalties due to taxing authorities. At December 31, 2024 and 2023, our deferred tax asset (liability) and related valuation allowance consisted of the following (in thousands): December 31, 2024 2023 Deferred tax assets: Tax intangibles basis greater than book basis $ 722 $ 722 Allowance for doubtful accounts 99 50 Unearned income 3,068 2,768 Federal and state net operating losses 16,435 15,967 Capital loss carryforward 331 511 Accrued expenses 775 761 Other 12 7 Total deferred tax asset 21,442 20,786 Valuation allowance ( 16,496 ) ( 16,169 ) Net deferred tax asset $ 4,946 $ 4,617 Deferred tax liabilities: Other $ ( 11 ) $ ( 6 ) Tax property basis greater/(less) than book basis ( 6,160 ) ( 5,932 ) Total deferred tax liability ( 6,171 ) ( 5,938 ) Net deferred tax asset (liability) $ ( 1,225 ) $ ( 1,321 ) At December 31, 2024 and 2023, we have reserved certain deferred tax assets of our TRS entities and recorded a valuation allowanc e of $ 16.5 million and $ 16.2 million, respectively . Primarily as a result of the limitation imposed by the Code on the utilization of net operating losses of acquired subsidiaries, we believe it is more likely than not that a portion of our deferred tax assets will not be realized, and therefore, have provided a valuation allowance to reserve against the balances. At December 31, 2024, we had TRS net operating loss carryforwards for U.S. federal income tax purposes of $ 65.3 million, of which $ 45.8 million is subject to expiration and will begin to expire in 2025. The remainder was generated after December 2017 and is not subject to expiration under the Tax Cuts and Jobs Act. $ 45.8 million of net operating loss carryforwards are attributable to acquired subsidiaries and are subject to substantial limitation on their use. At December 31, 2024, Braemar Hotels & Resorts Inc., our REIT, had net operating loss carryforwards for U.S. federal income tax purposes of $ 109.7 million based on the latest filed tax return. Of this amount, $ 2.2 million is subject to expiration in 2033. The remainder is not subject to expiration under the Tax Cuts and Jobs Act. We do not recognize deferred tax assets and a valuation allowance for the REIT since the REIT distributes its taxable income as dividends to stockholders, and in turn, the stockholders incur income taxes on those dividends. The following table summarizes the changes in the valuation allowance (in thousands): Year Ended December 31, 2024 2023 2022 Balance at beginning of year $ 16,169 $ 18,627 $ 17,343 Additions 327 — 1,284 Deductions — ( 2,458 ) — Balance at end of year $ 16,496 $ 16,169 $ 18,627 The USVI TRS operates under a tax holiday in the U.S. Virgin Islands, which is effective through December 31, 2028, and may be extended if certain additional requirements are satisfied. The tax holiday is conditional upon our meeting certain employment and investment thresholds. The impact of this tax holiday decreased current foreign taxes by $ 2.0 million, $ 2.7 million and $ 3.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. The benefit of the tax holiday on 148 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) net income (loss) per share was approximately, $ 0.03 , $ 0.04 and $ 0.05 for the years ended December 31, 2024, 2023 and 2022, respectively. In 2022, we acquired The Ritz-Carlton Reserve Dorado Beach in Dorado, Puerto Rico. Our taxable entities in Puerto Rico operate under a tax holiday which is effective through April 2, 2028. The tax holiday is conditional upon meeting certain employment and investment thresholds. The impact of this tax holiday decreased current foreign taxes by $ 1.7 million, $ 4.0 million and $ 2.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. The benefit of this tax holiday on net income (loss) per share was approximately $ 0.02 , $ 0.06 and $ 0.04 for the years ended December 31, 2024, 2023 and 2022, respectively. 21. Intangible Assets, net Intangible assets, net consisted of the following (in thousands): December 31, 2024 2023 Cost $ 5,682 $ 5,682 Accumulated amortization ( 2,557 ) ( 2,178 ) $ 3,125 $ 3,504 Intangible assets include the customer relationships associated with The Ritz-Carlton Sarasota acquisition on April 4, 2018. The customer relationships are being amortized over the 15 year expected life. For the years ended December 31, 2024, 2023 and 2022, amortization expense related to intangible assets was $ 379,000 , $ 379,000 and $ 378,000 , respectively. Estimated future amortization expense for intangible assets, net for each of the next five years and thereafter is as follows (in thousands): Intangible Assets, net 2025 $ 379 2026 379 2027 379 2028 379 2029 379 Thereafter 1,230 Total $ 3,125 22. Concentration of Risk Our investments are all concentrated within the hotel industry. All of our hotel properties are located within the U.S. and its territories. For the year ended December 31, 2024, The Ritz-Carlton St. Thomas, The Ritz-Carlton Sarasota and The Ritz-Carlton Reserve Dorado Beach generated revenues in excess of 10% of total hotel revenue amounting to approximately 33 % of total hotel revenue. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We are exposed to credit risk with respect to cash held at various financial institutions that are in excess of the FDIC insurance limits of $250,000 and amounts due or payable under our derivative contracts. Our counterparties to our derivative contracts are investment grade financial institutions. 23. Segment Reporting We operate in one reportable business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refers to owning hotel properties through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments; (i) offer similar products and services to their customers in the form of hotel rooms, food and beverage, and ancillary services; (ii) utilize third-party hotel management companies to deliver its products and services to its customers; (iii) are designed and operated to appeal to similar individuals, groups, leisure, and business customers; and (iv) third-party hotel managers utilize the same methods (direct hotel sales and various online booking portals) to distribute the Company’s products and services. As of December 31, 2024 and 149 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 2023, all of our hotel properties were in the U.S. and its territories. The Company’s chief operating decision maker (“CODM”) is its President and Chief Executive Officer. Each hotel property derives revenue primarily from guestroom sales, food and beverage sales, and revenues from other lodging services and amenities. The accounting policies of each operating segment are the same as those described in the summary of significant accounting policies in note 2. The CODM reviews and makes decisions on all aspects of the Company’s business using all available financial and non-financial data for each hotel individually. Capital allocation decisions to acquire, sell, enhance, redevelop, or perform renewal and replacement expenditures are determined on a hotel-by-hotel basis. Specifically, the CODM reviews the results of each hotel to assess the hotel’s profitability. The key measure the CODM uses to allocate resources and assess performance is individual hotel net income (loss) before interest expense, income taxes, depreciation, and amortization, adjusted to exclude certain items determined by management to not be reflective of its ongoing operating performance or incurred in the normal course of business (Hotel Adjusted EBITDA). The adjustments include gains and losses on hotel dispositions, impairment charges, pre-opening costs associated with extensive renovation projects, property-level legal settlements, restructuring, severance, and management transition costs, and other expenses identified by management to be non-recurring. 150 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The following tables include revenues, significant hotel operating expenses, and Hotel Adjusted EBITDA for the Company’s hotels, reconciled to the consolidated amounts included in the Company’s consolidated statements of operations (in thousands): Year Ended December 31, 2024 2023 2022 REVENUE Rooms $ 452,361 $ 464,899 $ 431,515 Food and beverage 181,250 185,331 159,241 Other hotel revenue 94,793 89,112 78,829 Total hotel revenue $ 728,404 $ 739,342 $ 669,585 EXPENSES Rooms $ 106,465 $ 105,439 $ 94,410 Food and beverage 145,901 144,544 125,555 Direct expenses 32,824 31,887 28,842 Indirect expenses: Property, general and administration 62,214 59,714 53,412 Sales and marketing 49,331 48,998 40,078 Information and telecommunications systems 8,331 8,159 6,521 Repairs and maintenance 30,732 29,587 25,509 Energy 23,696 24,603 22,205 Lease expense 4,052 6,283 6,190 Ownership expenses 3,765 3,912 3,575 Incentive management fee 8,037 9,935 12,466 Management fees 22,837 22,839 19,950 Property taxes 23,745 21,343 19,236 Other taxes 1,571 1,171 677 Insurance 16,766 14,489 10,454 540,267 532,903 469,080 Hotel adjusted EBITDA $ 188,137 $ 206,439 $ 200,505 Reconciliation of hotel operating income (loss) to net income (loss) Year Ended December 31, 2024 2023 2022 Hotel adjusted EBITDA $ 188,137 $ 206,439 $ 200,505 Ownership expenses included in other hotel expenses ( 2,882 ) ( 4,834 ) ( 6,575 ) Ownership expenses included in property taxes, insurance and other ( 426 ) ( 1,626 ) ( 399 ) Management fees ( 663 ) ( 422 ) ( 199 ) Depreciation and amortization ( 98,733 ) ( 93,272 ) ( 78,122 ) Advisory services fee ( 30,487 ) ( 31,089 ) ( 28,847 ) Gain (loss) on legal settlements — — 114 Corporate, general and administrative ( 14,361 ) ( 13,523 ) ( 18,084 ) Gain (loss) on disposition of assets and hotel properties 88,165 — — Equity in earnings (loss) of unconsolidated entities ( 1,608 ) ( 253 ) ( 328 ) Interest income 7,135 6,401 2,677 Other income (expense) — 293 — Interest expense and amortization of discounts and loan costs ( 108,124 ) ( 94,219 ) ( 52,166 ) Write-off of loan costs and exit fees ( 6,111 ) ( 3,489 ) ( 146 ) Gain (loss) on extinguishment of debt ( 22 ) 2,318 — Realized and unrealized gain (loss) on derivatives 585 ( 663 ) 4,961 Income tax (expense) benefit ( 842 ) ( 2,689 ) ( 4,043 ) Net income (loss) $ 19,763 $ ( 30,628 ) $ 19,348 The CODM does not receive asset information by segment. 151 BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 24. Subsequent Events On March 7, 2025, the Company refinanced its $ 293.2 million mortgage loan secured by The Clancy, The Notary Hotel, Marriott Seattle Waterfront, and Sofitel Chicago Magnificent Mile, which had an interest rate of SOFR + 2.66 % and a final maturity date in June of 2025 and its $ 62.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach, which had an interest rate of SOFR + 4.75 % and a final maturity date in March of 2026. The new $ 363.0 million mortgage loan bears interest at a floating interest rate of SOFR + 2.52 % and has a two-year initial term with three one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is secured by five hotels: The Clancy, The Notary Hotel, Marriott Seattle Waterfront, Sofitel Chicago Magnificent Mile, and The Ritz-Carlton Reserve Dorado Beach. On March 10, 2025, we entered into a Limited Waiver Under Advisory Agreement with Ashford Inc. and Ashford LLC (the “2025 Advisory Agreement Limited Waiver”). Pursuant to the 2025 Advisory Agreement Limited Waiver, the Company, the Operating Partnership, TRS and the Advisor waive the operation of any provision in our advisory agreement that would otherwise limit the ability of the Company in its discretion, at the Company’s cost and expense, to award during the first and second fiscal quarters of calendar year 2025, cash incentive compensation to employees and other representatives of the Advisor. 152 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.