Braemar Hotels & Resorts Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains registered trademarks that are the exclusive property of their respective owners, which are companies other than us, including Marriott International®, Hilton Worldwide®, Sofitel®, Hyatt® and Accor®. FORWARD-LOOKING STATEMENTS Throughout this Form 10-Q, we make forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature: • our business and investment strategy; • anticipated or expected purchases or sales of assets; • our projected operating results; • completion of any pending transactions; • our understanding of our competition; • projected capital expenditures; and • the impact of technology on our operations and business. Such forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our securities. Additionally, the following factors could cause actual results to vary from our forward-looking statements: • the factors discussed in our Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2026 (the “2025 10-K”), including those set forth under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Properties” and other filings under the Exchange Act; • changes in interest rates and inflation; • macroeconomic conditions, such as a prolonged period of weak economic growth, and volatility in capital markets; • uncertainty in the business sector and market volatility; • catastrophic events or geopolitical conditions, such as the conflict between Russia and Ukraine, Israel-Palestine-Iran conflict, ongoing instability in Venezuela and changes to tariffs or trade policies; • extreme weather conditions, which may cause property damage or interrupt business; • our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our liquidity requirements; • general volatility of the capital markets and the market price of our common and preferred stock; • general business and economic conditions affecting the lodging and travel industry; • changes in our business or investment strategy; • availability, terms and deployment of capital; • risks associated with our ability to effectuate our dividend policy, including factors such as operating results and the economic outlook influencing our board’s decision whether to pay further dividends at levels previously disclosed or to use available cash to pay dividends; • unanticipated increases in financing and other costs, including changes in interest rates; • changes in our industry and the markets in which we operate, interest rates, or local economic conditions; • the degree and nature of our competition; • actual and potential conflicts of interest with Ashford Trust, Ashford Inc. and its subsidiaries (including Ashford LLC, Remington Hospitality and Premier), and our executive officers and our non-independent directors; • changes in personnel of Ashford LLC or the lack of availability of qualified personnel; • changes in governmental regulations, accounting rules, tax rates and similar matters; 35 • legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”) and related rules, regulations and interpretations governing the taxation of REITs, including impacts from the One Big Beautiful Bill Act; • limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and • future sales and issuances of our common stock or other securities, which might result in dilution and could cause the price of our common stock to decline. When considering forward-looking statements, you should keep in mind the matters summarized under “Item 1A. Risk Factors” in Part I of our 2025 10-K and this Form 10-Q, and the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, could cause our actual results and performance to differ significantly from those contained in our forward-looking statements. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Form 10-Q. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Form 10-Q to conform these statements to actual results and performance, except as may be required by applicable law. Overview We are a Maryland corporation formed in April 2013 that invests primarily in high revenue per available room (“RevPAR”), luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by STR, LLC. Two times the U.S. national average was $200 for the year ended December 31, 2025. We have elected to be taxed as a REIT under the Code. We conduct our business and own substantially all of our assets through our operating partnership, Braemar OP. We operate in the direct hotel investment segment of the hotel lodging industry. As of June 30, 2026, we owned interests in 12 hotel properties in five states, the District of Columbia, Puerto Rico and St. Thomas, U.S. Virgin Islands with 2,831 total rooms. The hotel properties in our current portfolio are predominantly located in U.S. urban markets and resort locations with favorable growth characteristics resulting from multiple demand generators. We are advised by Ashford Hospitality Advisors LLC (“Ashford LLC”) 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. As of June 30, 2026, Remington Hospitality, a subsidiary of Ashford Inc., managed five of our 12 hotel properties. Third-party management companies managed the remaining hotel properties. Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to, design and construction services, debt placement and related services, 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 and cash management services. Mr. Monty J. Bennett, chairman of our board of directors and chairman and chief executive officer of Ashford Inc. and his father, Mr. Archie Bennett, Jr. (together, the “Bennetts”), as of June 30, 2026, hold a controlling interest in Ashford Inc. The Bennetts owned approximately 810,123 shares of Ashford Inc. common stock, which represented an approximate 52.5% ownership interest in Ashford Inc., and owned 18,777,914 shares of Ashford Inc. Series D Convertible Preferred Stock, which, along with all unpaid accrued and accumulated dividends thereon, was convertible (at a conversion price of $117.50 per share) into an additional approximate 4,745,833 shares of Ashford Inc. common stock, which if converted as of June 30, 2026, would have increased the Bennetts’ ownership interest in Ashford Inc. to 88.4%. The 18,777,914 shares of Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 360,000 shares owned by trusts. Additionally, Mr. Monty J. Bennett acquired the right to direct votes, effective March 25, 2025, and as of June 30, 2026, those rights represented approximately 534,000 common shares. As of June 30, 2026, Mr. Monty J. Bennett and Mr. Archie Bennett, Jr., together owned approximately 2,472,808 shares of our common stock (including common units, LTIP and performance LTIP units), which represented an approximate 3.4% ownership in the Company. 36 Recent Developments On May 26, 2026, the Company sold the Park Hyatt Beaver Creek Resort & Spa for $176 million in cash, subject to customary pro-rations and adjustments. Additionally, the Company repaid the $70.5 million mortgage loan that was secured by the hotel property. On June 12, 2026, the Company announced a series of actions designed to simplify its corporate structure, reduce costs, enhance governance and position the Company for long-term profitability and value creation. Following the conclusion of a lengthy strategic review process, and upon the recommendation of a Special Committee comprised solely of independent directors (the “Special Committee”), the BHR Board of Directors (the “Board”) has approved a management spin-out, which will enable Braemar to become a self-managed real estate investment trust (REIT). These actions include the initiation of steps to terminate the Fifth Amended and Restated Advisory Agreement (the “Advisory Agreement”) with Ashford Inc. and its affiliates (“Ashford”), hire employees directly, and reconstitute the Company’s Board. Benefits for Shareholders • A focused business generating significant revenue: On a go-forward basis, the Company intends to maintain a portfolio of approximately six to eight luxury properties across the U.S. and the Caribbean, which had a gross asset value of over $1 billion and generated total annual revenue of $300 to $350 million as of the trailing twelve months ending March 31, 2026. • Long-term cost savings: The Company intends to directly hire employees and relocate to new office space, headquartered in Dallas. By directly employing its own management team, Braemar expects to reduce G&A costs by more than $25 million per year. Based on prevailing industry EBITDA multiples, ranging from 11-13x, these savings imply significant potential equity value accretion. • Board and management fully aligned with shareholders’ best interests: The in-house management structure and a new Board are designed to improve shareholder alignment. The Company has retained Ferguson Partners, an independent executive search firm, to identify five new independent Board members. The new Board members will be appointed to the Board, with the existing directors simultaneously stepping down, at the termination of the Advisory Agreement and will also be nominated for election at the Company’s next annual meeting. • No disruption to management team: Certain members of the management team currently employed by Ashford will become employees of Braemar, who will work exclusively for the Company and have no ongoing relationship with Ashford or its affiliates. The Special Committee and the entire Board has worked tirelessly to exhaust all available options to maximize shareholder value. While initially a sale of the Company was explored, the Special Committee ultimately concluded that there was a superior value creation available by terminating the Advisory Agreement, spinning out management, and remaining publicly listed. While the directors have agreed to formally resign their positions, they remain devoted to the future success of the Company. Transition to Self-Managed REIT As part of the transition, Braemar will terminate the Advisory Agreement and all other material legacy contractual arrangements with Ashford and its affiliates. Following the termination, management, including Mr. Richard Stockton, will be employed directly by Braemar. This new structure is expected to reduce Braemar’s general and administrative costs by more than $25 million annually. Furthermore, by canceling the Ashford Master Agreements, the Company will be free to utilize any third-party company to provide property management, project management or other services at the Company’s hotels. The new self-management structure was recommended by the Special Committee and approved by the independent members of the full Board. Board Refreshment and Corporate Governance Enhancements Five new independent directors will be identified and added to the Board. Concurrent with these appointments, all existing directors (including the Chairman, Mr. Monty Bennett), except for Mr. Richard Stockton, have agreed to step down from the Board to make way for the new directors. The reconstituted Board will have an independent Chairman. The Company has retained Ferguson Partners to assist in the search for new directors, with a focus on ensuring that they collectively possess the right mix of skills and experience to oversee the Company and shape its future strategy. No individuals 37 will be appointed who have existing or prior relationships with Ashford, its Chairman and Chief Executive Officer, Monty J. Bennett, or Archie Bennett Jr. Governance Reforms The Company is also taking steps to implement best-practice corporate governance reforms to better align the Company with the best interests of all shareholders, including a thorough review and revision of the Company’s Bylaws, Corporate Governance Guidelines, Code of Ethics and Board Committee Charters. Additionally, Braemar will terminate its contractual relationships with Premier Project Management LLC and Remington Lodging & Hospitality, LLC, both of which are subsidiaries of Ashford Inc. Certain immaterial, short-term contracts will be retained with Inspire, Pure and RED Hospitality to avoid disrupting existing hotel operations. The Company Sale Fee will be triggered under the Advisory Agreement with Ashford upon the closing of previously announced asset sales. Net sale proceeds from future asset sales, after working capital needs and other reserves, will be transferred to Ashford to pay down a portion or all of the Company Sale Fee. The Company does not intend to sell all or substantially all of its assets, only the approximate number necessary to satisfy the Company’s obligation to pay the Company Sale Fee and Master Agreement Termination Fee. On June 25, 2026 the Company extended its $43.4 million mortgage loan secured by The Ritz-Carlton Lake Tahoe. The loan had an initial maturity date of July 15, 2026 and now has a maturity date of October 15, 2026. An additional three-month maturity extension is also available at the Company’s discretion on the same terms. On July 13, 2026, the Company entered into a definitive agreement to sell the Pier House Resort & Spa for a purchase price of $190 million in cash, subject to customary pro-rations and adjustments. The agreement included a nonrefundable deposit of $6.0 million. On July 14, 2026, the Company completed the sale of the Ritz-Carlton Sarasota, the Bardessono Hotel and Spa and the Hotel Yountville for a purchase price of $437.5 million in cash, subject to customary pro-rations and adjustments. Additionally, the Company repaid approximately $232.8 million on the mortgage loan that was partially secured by the hotel properties. Upon closing, the Company Sale Fee was triggered under the Advisory Agreement with Ashford Inc., and as a result, the Company incurred a related liability of $480.0 million during the third quarter of 2026. The Company subsequently paid $173.0 million to Ashford Inc. to pay down a portion of the Company Sale Fee. In July 2026, the Company exercised its put option to require the noncontrolling interest holder to repurchase the Company’s interest in CR JV, a joint venture that owns a parcel of land and is consolidated by the Company. As a result, in August 2026, the noncontrolling interest holder repurchased CR JV for $6.3 million and, in conjunction with the repurchase, the Company derecognized the land and the related mortgage loan secured by the land. Key Indicators of Operating Performance We use a variety of operating and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP, as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include: • Occupancy . Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of hotels in a given period. • ADR . ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We use ADR to assess the pricing levels that we are able to generate. • RevPAR. RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the 38 leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees. RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expenses. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs. Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms. We also use funds from operations (“FFO”), Adjusted FFO, earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) and Adjusted EBITDAre as measures of the operating performance of our business. See “Non-GAAP Financial Measures.” 39 RESULTS OF OPERATIONS Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 The following table summarizes changes in key line items from our condensed consolidated statements of operations for three months ended June 30, 2026 and 2025 (in thousands except percentages): Three Months Ended June 30, Favorable (Unfavorable) 2026 2025 $ Change % Change Revenue Rooms $ 102,183 $ 109,824 $ (7,641) (7.0) % Food and beverage 45,322 45,571 (249) (0.5) Other 23,521 23,682 (161) (0.7) Total hotel revenue 171,026 179,077 (8,051) (4.5) Expenses Hotel operating expenses: Rooms 24,218 27,285 3,067 11.2 Food and beverage 34,897 35,767 870 2.4 Other expenses 52,924 56,445 3,521 6.2 Management fees 5,138 5,541 403 7.3 Total hotel operating expenses 117,177 125,038 7,861 6.3 Property taxes, insurance and other 7,507 7,892 385 4.9 Depreciation and amortization 21,433 23,360 1,927 8.2 Advisory services fee 7,280 7,191 (89) (1.2) Corporate general and administrative 4,413 (2,298) (6,711) (292.0) Total expenses 157,810 161,183 3,373 2.1 Gain (loss) on disposition of assets and hotel property 17,395 — 17,395 Operating income (loss) 30,611 17,894 12,717 71.1 Interest income 774 1,519 (745) (49.0) Other income (expense) — (1,250) 1,250 100.0 Interest expense and amortization of discounts and loan costs (20,513) (25,361) 4,848 19.1 Write-off of loan costs and exit fees (1,484) (3) (1,481) (49,366.7) Realized and unrealized gain (loss) on derivatives 35 15 20 133.3 Income (loss) before income taxes 9,423 (7,186) 16,609 231.1 Income tax (expense) benefit (2,481) 345 (2,826) (819.1) Net income (loss) 6,942 (6,841) 13,783 201.5 (Income) loss attributable to noncontrolling interest in consolidated entities 48 (115) (163) (141.7) Net (income) loss attributable to redeemable noncontrolling interests in operating partnership 48 1,489 (1,441) (96.8) Net income (loss) attributable to the Company $ 7,038 $ (5,467) $ 12,505 228.7 % 40 All hotel properties owned for the three months ended June 30, 2026 and 2025 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended June 30, 2026 and 2025. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following dispositions affect reporting comparability related to our condensed consolidated financial statements: Hotel Property Location Type Date Marriott Seattle Waterfront Seattle, Washington Disposition August 7, 2025 The Clancy San Francisco, California Disposition November 6, 2025 Park Hyatt Beaver Creek Resort & Spa Avon, Colorado Disposition May 26, 2026 The following table illustrates the key performance indicators of all hotel properties that were included in our results of operations during the three months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 2025 Occupancy 70.84 % 71.85 % ADR (average daily rate) $ 533.37 $ 438.58 RevPAR (revenue per available room) $ 377.83 $ 315.11 Rooms revenue (in thousands) $ 102,183 $ 109,824 Total hotel revenue (in thousands) $ 171,026 $ 179,077 The following table illustrates the key performance indicators of the 12 hotel properties that were owned for the full three months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 2025 Occupancy 72.61 % 73.10 % ADR (average daily rate) $ 537.64 $ 476.32 RevPAR (revenue per available room) $ 390.37 $ 348.22 Rooms revenue (in thousands) $ 101,431 $ 90,564 Total hotel revenue (in thousands) $ 168,298 $ 152,509 Net Income (Loss) Attributable to the Company. Net income (loss) attributable to the Company changed $12.5 million, from a net loss of $5.5 million for the three months ended June 30, 2025 (the “2025 quarter”) to net income of $7.0 million for the three months ended June 30, 2026 (the “2026 quarter”), as a result of the factors discussed below. Rooms Revenue . Rooms revenue decreased $7.6 million, or 7.0%, to $102.2 million during the 2026 quarter compared to the 2025 quarter primarily due to the sales of Marriott Seattle Waterfront in August 2025, The Clancy in November 2025 and the Park Hyatt Beaver Creek Resort & Spa in May 2026. During the 2026 quarter, our 12 comparable hotel properties experienced a 49 basis point decrease in occupancy and a 12.9% increase in room rates. 41 Fluctuations in rooms revenue between the 2026 quarter and the 2025 quarter are a result of the changes in occupancy and ADR between the 2026 quarter and the 2025 quarter as reflected in the table below (dollars in thousands): Hotel Property Favorable (Unfavorable) Rooms Revenue Occupancy (change in bps) ADR (change in %) Comparable Capital Hilton $ 342 (19) 2.9 % The Notary Hotel 1,076 (205) 15.7 % Sofitel Chicago Magnificent Mile 903 82 9.5 % Pier House Resort & Spa 629 836 (0.4) % The Ritz-Carlton St. Thomas 2,092 469 12.3 % Hotel Yountville 522 188 14.4 % The Ritz-Carlton Sarasota 1,728 708 7.4 % Bardessono Hotel and Spa 211 (505) 12.9 % The Ritz-Carlton Lake Tahoe (499) (1,388) 21.7 % Cameo Beverly Hills 936 (365) 45.4 % The Ritz-Carlton Reserve Dorado Beach 3,271 903 11.6 % Four Seasons Resort Scottsdale (344) (1,111) 17.3 % Total $ 10,867 (49) 12.9 % Noncomparable Park Hyatt Beaver Creek Resort & Spa (718) 36 (16.5) % Marriott Seattle Waterfront (8,911) n/a n/a The Clancy (8,879) n/a n/a Food and Beverage Revenue . Food and beverage revenue decreased $249,000, or 0.5%, to $45.3 million during the 2026 quarter compared to the 2025 quarter. This decrease is attributable to an aggregate decrease of $3.2 million at Sofitel Chicago Magnificent Mile, Hotel Yountville, The Ritz-Carlton Lake Tahoe, Bardessono Hotel and Spa and Four Seasons Resort Scottsdale and a decrease of $2.9 million due to the sales of Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa. These decreases were partially offset by an aggregate increase of $5.8 million at seven comparable hotel properties. Other Hotel Revenue . Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, decreased $161,000, or 0.7%, to $23.5 million during the 2026 quarter compared to the 2025 quarter. This decrease is attributable to a decrease of $2.5 million due to the sales of Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa and an aggregate decrease of $217,000 at Capital Hilton, Sofitel Chicago Magnificent Mile, The Ritz-Carlton Lake Tahoe and Cameo Beverly Hills, partially offset by an aggregate increase of $2.5 million at eight comparable hotel properties. Rooms Expense . Rooms expense decreased $3.1 million, or 11.2%, to $24.2 million in the 2026 quarter compared to the 2025 quarter. This decrease is primarily attributable to an aggregate decrease of $5.0 million due to the sales of Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa and an aggregate decrease of $208,000 at Capital Hilton, Bardessono Hotel and Spa, The Ritz-Carlton Lake Tahoe and Four Seasons Resort Scottsdale. These decreases are partially offset by an aggregate increase of $2.1 million at eight comparable hotel properties. Food and Beverage Expense . Food and beverage expense decreased $870,000, or 2.4%, to $34.9 million during the 2026 quarter compared to the 2025 quarter. This decrease is attributable to an aggregate decrease of $802,000 at Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, The Ritz-Carlton Lake Tahoe and Four Seasons Resort Scottsdale and a decrease of $3.2 million from the three disposed hotel properties, partially offset by an aggregate increase of $3.1 million at eight comparable hotel properties. Other Operating Expenses . Other operating expenses decreased $3.5 million, or 6.2%, to $52.9 million in the 2026 quarter compared to the 2025 quarter. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. We experienced a decrease of $3.3 million in indirect expenses and incentive management fees and a decrease of $222,000 in direct expenses in the 2026 quarter as compared to the 2025 quarter. Direct expenses were 4.7% of total hotel revenue in the 2026 quarter and 4.6% in the 2025 quarter. 42 The decrease in direct expenses is associated with lower direct expenses of $565,000 due to the sales of Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa partially offset by higher direct expenses of $343,000 at our 12 comparable hotel properties. The decrease in indirect expenses comprises decreases in: (i) general and administrative costs of $2.2 million comprising an aggregate decrease of $3.0 million from the three disposed hotel properties, partially offset by an aggregate increase of $874,000 at our 12 comparable hotel properties; (ii) marketing costs of $1.4 million comprising a decrease of $1.9 million from the three disposed hotel properties partially offset by an aggregate increase of $510,000 at our 12 comparable hotel properties; (iii) repairs and maintenance of $974,000 comprising a decrease of $1.1 million from the three disposed hotel properties partially offset by an aggregate increase of $121,000 at our 12 comparable hotel properties; and (iv) energy costs of $220,000 comprising a decrease of $582,000 from the three disposed hotel properties partially offset by an aggregate increase of $362,000 at our 12 comparable hotel properties. These increases were partially offset by increases in incentive management fees of $1.4 million comprising an aggregate increase of $1.2 million at our 12 comparable hotel properties and an increase of $253,000 from the three disposed hotel properties. Management Fees . Base management fees decreased $403,000, or 7.3%, to $5.1 million in the 2026 quarter compared to the 2025 quarter. Base management fees decreased $131,000 at The Ritz-Carlton Lake Tahoe and Four Seasons Resort Scottsdale and $932,000 from the three disposed hotel properties. These decreases were partially offset by an aggregate increase of $659,000 at ten comparable hotel properties. Property Taxes, Insurance and Other . Property taxes, insurance and other decreased $385,000, or 4.9%, to $7.5 million in the 2026 quarter compared to the 2025 quarter. The decrease is primarily attributable to an aggregate decrease of approximately $281,000 at eleven comparable hotel properties and a decrease of $1.6 million from the three disposed hotel properties. These decreases were partially offset by an aggregate increase of approximately $1.5 million at the Sofitel Chicago Magnificent Mile. Depreciation and Amortization . Depreciation and amortization decreased $1.9 million, or 8.2%, to $21.4 million in the 2026 quarter compared to the 2025 quarter. There was an aggregate decrease of $306,000 at Capital Hilton, The Notary Hotel, Pier House Resort & Spa and The Ritz-Carlton Sarasota and a decrease of $3.6 million from the three disposed hotel properties, partially offset by an aggregate increase of $2.0 million at eight comparable hotel properties. Advisory Services Fee. Advisory services fee increased $89,000, or 1.2%, to $7.3 million in the 2026 quarter compared to the 2025 quarter due to increases of $312,000 in the base advisory fee and $51,000 in equity-based compensation partially offset by decreases of $188,000 in the incentive fee and $86,000 in reimbursable expenses. In the 2026 quarter, we recorded an advisory services fee of $7.3 million, which included a base advisory fee of $3.8 million and reimbursable expenses of $3.5 million. In the 2025 quarter, we recorded an advisory services fee of $7.2 million, which included a base advisory fee of $3.5 million, reimbursable expenses of $3.6 million, incentive fee of $188,000, and a credit to expense of $51,000 associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. Corporate General and Administrative . Corporate general and administrative expense was $4.4 million in the 2026 quarter and consisted of $2.6 million in professional fees, $1.4 million of public company costs and $410,000 of miscellaneous expenses. Corporate general and administrative expense was a credit to expense of $2.3 million in the 2025 quarter and consisted of $1.6 million in professional fees, $5.0 million of reimbursed legal costs, $122,000 in miscellaneous expenses and $936,000 in public company costs. Gain (loss) on disposition of assets and hotel property . In the 2026 quarter, we recorded a gain of approximately $17.4 million related to the sale of the Park Hyatt Beaver Creek Resort & Spa. Interest Income . Interest income was $774,000 and $1.5 million in the 2026 quarter and 2025 quarter, respectively. The decrease in interest income in the 2026 quarter was primarily attributable to lower interest rates and lower excess cash balances in the 2026 quarter compared to the 2025 quarter. Other Income (Expense). Other expense was $1.3 million in the 2025 quarter due to a realized loss on the sale of a portion of CMBS. 43 Interest Expense and Amortization of Loan Costs . Interest expense and amortization of loan costs decreased $4.8 million, or 19.1%, to $20.5 million in the 2026 quarter compared to the 2025 quarter. This decrease is primarily due to lower interest expense of $4.6 million and lower amortization costs of $246,000 from lower average interest rates and lower loan balances. Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees was $1.5 million in the 2026 quarter due to The Ritz-Carlton Lake Tahoe loan extension. Write-off of loan costs and exit fees was $3,000 in the 2025 quarter. Realized and Unrealized Gain (Loss) on Derivatives . Realized and unrealized gain on derivatives of $35,000 for the 2026 quarter consisted primarily of an unrealized gain on interest rate caps. Realized and unrealized gain on derivatives of $15,000 for the 2025 quarter consisted of a realized gain of $180,000 associated with payments received from counterparties on in-the-money interest rate caps, partially offset by an unrealized loss on interest rate caps of approximately $165,000. Income Tax (Expense) Benefit . Income tax (expense) benefit changed $2.8 million, from a benefit of $345,000 in the 2025 quarter to expense of $2.5 million in the 2026 quarter. This change was primarily due to an increase in the taxable income of certain of our TRS entities in the 2026 quarter compared to the 2025 quarter. (Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities. Our noncontrolling interest partners in consolidated entities were allocated a loss of $48,000 and income of $115,000 in the 2026 quarter and the 2025 quarter, respectively. At June 30, 2026, noncontrolling interest in consolidated entities represented an ownership interest of 25% ownership interest in a JV. At June 30, 2025, noncontrolling interest in consolidated entities represented an ownership interest of 25% in one hotel property held by one entity and a 25% ownership interest in a JV. Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated a net loss of $48,000 and $1.5 million in the 2026 quarter and the 2025 quarter, respectively. Redeemable noncontrolling interests in Braemar OP represented ownership interests of 6.27% and 8.51% as of June 30, 2026 and 2025, respectively. 44 Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 The following table summarizes changes in key line items from our condensed consolidated statements of operations for the six months ended June 30, 2026 and 2025 (in thousands except percentages): Six Months Ended June 30, Favorable (Unfavorable) 2026 2025 $ Change % Change Revenue Rooms $ 230,984 $ 245,916 $ (14,932) (6.1) % Food and beverage 97,664 97,359 305 0.3 Other 51,361 51,622 (261) (0.5) Total hotel revenue 380,009 394,897 (14,888) (3.8) Expenses Hotel operating expenses: Rooms 49,096 55,504 6,408 11.5 Food and beverage 73,807 75,977 2,170 2.9 Other expenses 112,802 116,821 4,019 3.4 Management fees 11,332 12,451 1,119 9.0 Total hotel operating expenses 247,037 260,753 13,716 5.3 Property taxes, insurance and other 12,159 18,357 6,198 33.8 Depreciation and amortization 44,012 46,755 2,743 5.9 Advisory services fee 14,684 13,802 (882) (6.4) Corporate general and administrative 9,280 596 (8,684) (1,457.0) Total expenses 327,172 340,263 13,091 3.8 Gain (loss) on disposition of assets and hotel property 17,398 — 17,398 Operating income (loss) 70,235 54,634 15,601 28.6 Equity in earnings (loss) of unconsolidated entity (31) — (31) Interest income 1,584 3,407 (1,823) (53.5) Other income (expense) — (1,250) 1,250 100.0 Interest expense and amortization of discounts and loan costs (41,708) (50,188) 8,480 16.9 Write-off of loan costs and exit fees (1,489) (1,467) (22) 1.5 Realized and unrealized gain (loss) on derivatives 283 (183) 466 254.6 Income (loss) before income taxes 28,874 4,953 23,921 483.0 Income tax (expense) benefit (3,898) (1,122) (2,776) (247.4) Net income (loss) 24,976 3,831 21,145 551.9 (Income) loss attributable to noncontrolling interest in consolidated entities 65 (51) 116 227.5 Net (income) loss attributable to redeemable noncontrolling interests in operating partnership (299) 1,751 (2,050) (117.1) Net income (loss) attributable to the Company $ 24,742 $ 5,531 $ 19,211 347.3 % All hotel properties owned for the six months ended June 30, 2026 and 2025 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the six months ended June 30, 2026 and 2025. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following dispositions affect reporting comparability related to our condensed consolidated financial statements: Hotel Property Location Type Date Marriott Seattle Waterfront Seattle, Washington Disposition August 7, 2025 The Clancy San Francisco, California Disposition November 6, 2025 Park Hyatt Beaver Creek Resort & Spa Avon, Colorado Disposition May 26, 2026 45 The following table illustrates the key performance indicators of all hotel properties that were included in our results of operations during the six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 2025 Occupancy 67.65 % 68.23 % ADR (average daily rate) $ 626.48 $ 519.90 RevPAR (revenue per available room) $ 423.79 $ 354.74 Rooms revenue (in thousands) $ 230,984 $ 245,916 Total hotel revenue (in thousands) $ 380,009 $ 394,897 The following table illustrates the key performance indicators of the 12 comparable hotel properties that were owned for the full six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 2025 Occupancy 68.18 % 68.31 % ADR (average daily rate) $ 616.07 $ 561.80 RevPAR (revenue per available room) $ 420.04 $ 383.74 Rooms revenue (in thousands) $ 217,184 $ 198,506 Total hotel revenue (in thousands) $ 355,506 $ 328,323 Net Income (Loss) Attributable to the Company. Net income attributable to the Company increased $19.2 million from $5.5 million for the six months ended June 30, 2025 (the “2025 period”) to $24.7 million for the six months ended June 30, 2026 (the “2026 period”), as a result of the factors discussed below. Rooms Revenue . Rooms revenue decreased $14.9 million to $231.0 million during the 2026 period compared to the 2025 period primarily due to the sales of Marriott Seattle Waterfront in August 2025, The Clancy in November 2025 and Park Hyatt Beaver Creek Resort & Spa in May 2026. During the 2026 period, our 12 comparable hotel properties experienced a 9.7% increase in room rates and a 13 basis point decrease in occupancy compared to the 2025 period. 46 Fluctuations in rooms revenue between the 2026 period and the 2025 period are a result of the changes in occupancy and ADR between the 2026 period and the 2025 period as reflected in the table below (dollars in thousands): Hotel Property Favorable (Unfavorable) Rooms Revenue Occupancy (change in bps) ADR (change in %) Comparable Capital Hilton $ (1,101) (58) (3.9) % The Notary Hotel 1,363 (32) 10.2 % Sofitel Chicago Magnificent Mile 992 11 8.3 % Pier House Resort & Spa 1,433 822 (0.2) % The Ritz-Carlton St. Thomas 4,441 448 9.7 % Hotel Yountville 469 109 8.3 % The Ritz-Carlton Sarasota 3,228 475 7.7 % Bardessono Hotel and Spa 669 (222) 14.4 % The Ritz-Carlton Lake Tahoe (577) (674) 10.3 % Cameo Beverly Hills 799 (930) 36.5 % The Ritz-Carlton Reserve Dorado Beach 5,325 458 9.1 % Four Seasons Resort Scottsdale 1,635 (514) 15.9 % Total $ 18,676 (13) 9.7 % Noncomparable Park Hyatt Beaver Creek Resort & Spa $ (1,493) 428 4.3 % Marriott Seattle Waterfront $ (18,655) n/a n/a The Clancy $ (13,460) n/a n/a Food and Beverage Revenue . Food and beverage revenue increased $305,000, or 0.3%, to $97.7 million during the 2026 period compared to the 2025 period. We experienced an aggregate increase in food and beverage revenue of approximately $8.5 million at seven comparable hotel properties. This increase was partially offset by an aggregate decrease of $3.6 million at Sofitel Chicago Magnificent Mile, Hotel Yountville, Bardessono Hotel and Spa, The Ritz-Carlton Lake Tahoe, and Four Seasons Resort Scottsdale and a decrease of $4.6 million due to the sales of the Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa. Other Hotel Revenue . Other hotel revenue, which consists mainly of condominium management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, decreased $261,000, or 0.5%, to $51.4 million during the 2026 period compared to the 2025 period. This decrease is attributable to an aggregate decrease of approximately $705,000 at the Capital Hilton, Sofitel Chicago Magnificent Mile and Cameo Beverly Hills as well as a decrease of $3.9 million due to the sales of the Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa. These decreases were partially offset by higher other hotel revenue of $4.3 million at nine comparable hotel properties. Rooms Expense . Rooms expense decreased $6.4 million, or 11.5%, to $49.1 million in the 2026 period compared to the 2025 period. This decrease is attributable to an aggregate decrease in rooms expense of $411,000 at Capital Hilton, Pier House Resort & Spa, Bardessono Hotel and Spa and The Ritz-Carlton Lake Tahoe and a decrease of $9.2 million due to the sales of the Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa. These decreases were partially offset by an aggregate increase of $3.2 million at eight comparable hotel properties. Food and Beverage Expense . Food and beverage expense decreased $2.2 million, or 2.9%, to $73.8 million during the 2026 period compared to the 2025 period. This decrease is attributable to lower aggregate food and beverage expense of approximately $1.2 million at the Sofitel Chicago Magnificent Mile, Pier House Resort & Spa, Bardessono Hotel and Spa, The Ritz-Carlton Lake Tahoe and Four Seasons Resort Scottsdale and a decrease of $5.2 million due to the sales of the Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa. These decreases were partially offset by an aggregate increase of approximately $4.3 million at seven comparable hotel properties. Other Operating Expenses . Other operating expenses decreased $4.0 million, or 3.4%, to $112.8 million in the 2026 period compared to the 2025 period. Other operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. We experienced an increase of $330,000 in direct expenses and a decrease of $4.3 million in indirect expenses and incentive management fees in the 2026 period compared to the 2025 period. Direct expenses were 4.7% of total hotel revenue in the 2026 period and 4.5% in the 2025 period. 47 The increase in direct expenses is associated with higher direct expenses of $951,000 at our 12 comparable hotel properties partially offset by a decrease of $621,000 due to the sales of Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa. The decrease in indirect expenses is comprised of decreases in: (i) general and administrative costs of $2.7 million comprising a decrease of $4.9 million from the three disposed hotel properties partially offset by an aggregate increase of $2.1 million at our 12 comparable hotel properties; (ii) marketing costs of $2.1 million comprising an aggregate decrease of $3.1 million from the three disposed hotel properties partially offset by an increase of $1.0 million at our 12 comparable hotel properties; and (iii) repairs and maintenance of $2.0 million comprising a decrease of $2.0 million from the three disposed hotel properties partially offset by an aggregate increase of $38,000 at our 12 comparable hotel properties. These decreases were partially offset by increases in: (i) incentive management fees of $2.3 million at our 12 comparable hotel properties and an increase of $267,000 from the three disposed hotel properties; and (ii) energy costs of $350,000 comprising an aggregate increase of $1.3 million at our 12 comparable hotel properties partially offset by a decrease of $984,000 from the three disposed hotel properties. Management Fees . Base management fees decreased $1.1 million, or 9.0%, to $11.3 million in the 2026 period compared to the 2025 period. Management fees decreased $1.7 million due to the sales of the Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa as well as decreases of $112,000 at Capital Hilton and The Ritz-Carlton Lake Tahoe. These decreases were partially offset by an aggregate increase of $700,000 at ten comparable hotel properties. Property Taxes, Insurance and Other . Property taxes, insurance and other decreased $6.2 million, or 33.8%, to $12.2 million in the 2026 period compared to the 2025 period. This decrease is primarily attributable to a decrease of $3.1 million due to the sales of the Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa and an aggregate decrease of $3.0 million at our 12 comparable hotel properties, primarily attributable to a favorable property tax assessment at the Sofitel Chicago Magnificent Mile. Depreciation and Amortization . Depreciation and amortization decreased $2.7 million, or 5.9%, to $44.0 million for the 2026 period compared to the 2025 period. This decrease is due to lower depreciation of $6.3 million from the sales of the Marriott Seattle Waterfront, The Clancy and Park Hyatt Beaver Creek Resort & Spa and an aggregate decrease of $475,000 at Capital Hilton, Pier House Resort & Spa and Sofitel Chicago Magnificent Mile. These decreases were partially offset by an aggregate increase of $4.0 million at nine comparable hotel properties. Advisory Services Fee. Advisory services fee increased $882,000, or 6.4%, to $14.7 million in the 2026 period compared to the 2025 period due to higher reimbursable expenses of $549,000, higher base advisory fee of $504,000 and higher equity-based compensation of $99,000, partially offset by a lower incentive fee of $270,000. In the 2026 period, we recorded an advisory services fee of $14.7 million, which included a base advisory fee of $7.6 million and reimbursable expenses of $7.1 million. In the 2025 period, we recorded an advisory services fee of $13.8 million, which included a base advisory fee of $7.1 million, reimbursable expenses of $6.6 million, an incentive fee of $270,000 and a credit to expense of $99,000 associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. Corporate General and Administrative . Corporate general and administrative expense was $9.3 million in the 2026 period and consisted of $6.1 million in professional fees, $2.1 million of public company costs, $435,000 related to Ashford Securities and $682,000 in miscellaneous expenses. Corporate general and administrative expense was $596,000 in the 2025 period and consisted of $3.1 million in professional fees, $1.6 million of public company costs and $839,000 in miscellaneous expenses. These expenses were partially offset by an expense reduction of $5.0 million from an insurance recovery for prior legal expenses. Gain (loss) on disposition of assets and hotel property . In the 2026 period we recorded a gain of approximately $17.4 million related to the sale of the Park Hyatt Beaver Creek Resort & Spa. Equity in Earnings (Loss) of Unconsolidated Entity . There was a $31,000 loss in equity in earnings (loss) of unconsolidated entity in the 2026 period as a result of writing off the remaining OpenKey note receivable balance. Other Income (Expense). Other expense was $1.3 million in the 2025 period due to a realized loss on the sale of a portion of CMBS. 48 Interest Income . Interest income was $1.6 million and $3.4 million in the 2026 period and the 2025 period, respectively. The decrease in interest income in the 2026 period was primarily attributable to lower interest rates and lower excess cash balances compared to the 2025 period. Interest Expense and Amortization of Discounts and Loan Costs . Interest expense and amortization of discounts and loan costs decreased $8.5 million, or 16.9%, to $41.7 million for the 2026 period compared to the 2025 period. The decrease is primarily due to lower interest expense of $8.5 million from lower average interest rates and lower average debt balances in the 2026 period partially offset by higher amortization of loan costs of approximately $31,000 in the 2026 period compared to the 2025 period. Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees was $1.5 million in the 2026 period related to The Ritz-Carlton Lake Tahoe loan extension. Write-off of loan costs and exit fees was $1.5 million in the 2025 period related to various loan refinances and modifications. Realized and Unrealized Gain (Loss) on Derivatives . Realized and unrealized gain on derivatives of $283,000 for the 2026 period consisted of an unrealized gain on interest rate caps of $273,000 and a realized gain of $10,000 associated with payments received from counterparties on in-the-money interest rate caps. Realized and unrealized loss on derivatives of $183,000 for the 2025 period consisted of an unrealized loss on interest rate caps of $551,000, partially offset by a realized gain of $368,000 associated with payments received from counterparties on in-the-money interest rate caps. Income Tax (Expense) Benefit . Income tax expense increased $2.8 million, from $1.1 million in the 2025 period to $3.9 million in the 2026 period. This change was primarily due to an increase in the taxable income of certain of our TRS entities in the 2026 period compared to the 2025 period. (Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities . Our noncontrolling interest partners in consolidated entities were allocated a loss of $65,000 and income of $51,000 in the 2026 period and the 2025 period, respectively. For the 2026 period noncontrolling interest in consolidated entities represented a 25% ownership interest in a JV. As of June 30, 2025, noncontrolling interest in consolidated entities represented an ownership interest of 25% in one hotel property held by one entity and a 25% ownership interest in a JV. Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net income of $299,000 in the 2026 period and a net loss of $1.8 million in the 2025 period. Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 6.27% and 8.51% as of June 30, 2026 and 2025, respectively. LIQUIDITY AND CAPITAL RESOURCES Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including: • advisory fees, including the Company Sale Fee, payable to Ashford LLC; • recurring maintenance necessary to maintain our hotel properties in accordance with brand standards; • interest expense and scheduled principal payments on outstanding indebtedness; • dividends on our common stock; • dividends on our preferred stock; • redemptions of our non-traded preferred stock; and • capital expenditures to improve our hotel properties. We expect to meet our short-term liquidity requirements generally through net cash provided by operations, capital market activities, asset sales and existing cash balances. Pursuant to the advisory agreement between us and our Advisor, we must pay our Advisor on a monthly basis a base advisory fee, subject to a minimum base advisory fee. The minimum base advisory fee is equal to the greater of: (i) 90% of the base fee paid for the same month in the prior fiscal year; and (ii) 1/12 th of the “G&A Ratio” for the most recently completed fiscal quarter multiplied by our total market capitalization on the last balance sheet date included in the most recent quarterly report on Form 10-Q or annual report on Form 10-K that we file with the SEC. Thus, even if our total market capitalization and performance decline, we will still be required to make payments to our Advisor equal to the minimum base advisory fee, which could adversely impact our liquidity and financial condition. Additionally, under the terms of the Amended Side Letter agreed 49 with our Advisor in December 2025, we are required to remit property sale net proceeds, after taking into account our anticipated working capital requirements, to our Advisor to satisfy the Company Sale Fee and Master Agreements Termination Fee, once triggered. Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotel properties and redevelopments, renovations, expansions and other capital expenditures that need to be made periodically with respect to our hotel properties and scheduled debt payments. We expect to meet our long-term liquidity requirements through various sources of capital, including future common and preferred equity issuances, existing working capital, net cash provided by operations, hotel mortgage indebtedness and other secured and unsecured borrowings. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity and market perceptions about us. The success of our business strategy will depend, in part, on our ability to access these various capital sources. While management cannot provide any assurances, management believes that our cash flow from operations and our existing cash balances will be adequate to meet upcoming anticipated requirements for interest and principal payments on debt (excluding any potential final maturity principal payments and paydowns for extension tests), working capital, and capital expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S. federal income tax purposes. Our hotel properties will require periodic capital expenditures and renovations to remain competitive. In addition, acquisitions, redevelopments or expansions of hotel properties may require significant capital outlays. We may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures, acquisitions or hotel redevelopment through retained earnings is very limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects could be materially and adversely affected. Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties declines. When these provisions are triggered, substantially all of the profit generated by the hotel properties securing such loan is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. This could affect our liquidity and our ability to make distributions to our stockholders until such time that a cash trap is no longer in effect for such loan. These cash trap provisions have been triggered on two mortgage loans, as discussed below. Our loans that are in cash traps may remain subject to the cash trap provisions for a substantial period of time which could limit our flexibility and adversely affect our financial condition or our qualification as a REIT. As of June 30, 2026, the mortgage loan secured by The Ritz-Carlton Lake Tahoe and the loan secured by the Capital Hilton were in cash traps. The amount of cash in the cash traps as of June 30, 2026 was $0. As of June 30, 2026, the Company held cash and cash equivalents of $98.2 million (inclusive of amounts held for sale) and restricted cash of $52.6 million, the vast majority of which is comprised of lender and manager-held reserves. As of June 30, 2026, $19.4 million (inclusive of amounts held for sale) was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs. As of June 30, 2026, our net debt to gross assets was 43.5%. The Company’s cash and cash equivalents are primarily comprised of corporate cash invested in short-term U.S. Treasury securities with maturity dates of less than 90 days and corporate cash held at commercial banks in Insured Cash Sweep (“ICS”) accounts, which are fully insured by the FDIC. The Company’s cash and cash equivalents also includes property-level operating cash deposited with commercial banks that have been designated as a Global Systemically Important Bank (“G-SIB”) by the Financial Stability Board (“FSB”) and a small amount deposited with other commercial banks. Each share of our Series E Preferred Stock and Series M Preferred Stock 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, subject to the limitations as stated in the Articles Supplementary. 50 As of June 30, 2026, the Company determined that a portion of the outstanding Series E Preferred Stock and Series M Preferred Stock met the criteria for mandatory redemption based on certain holders initiating redemption requests that exceeded the limitations set forth in the Articles Supplementary. As of June 30, 2026, the Company has received $53.4 million in investor-initiated Series E Preferred Stock redemption requests and $1.3 million in investor-initiated Series M Preferred Stock redemption requests that have not been completed and are included in “redeemable preferred stock redemptions payable” in our condensed consolidated balance sheet. Based on the various limitations in place as of June 30, 2026, and not considering any future redemption requests received, we expect that all of these redemption requests will be fulfilled over the subsequent twelve months from June 30, 2026. As of July 31, 2026, the redeemable preferred stock redemptions payable was approximately $57.8 million. Equity Transactions On November 13, 2019, we filed an initial registration statement with the SEC, as amended on January 24, 2020, for shares of our non-traded Series E Redeemable Preferred Stock (the “Series E Preferred Stock”) and our non-traded Series M Redeemable Preferred Stock (the “Series M Preferred Stock”). The registration statement became effective on February 21, 2020, and contemplates the issuance and sale of up to 20,000,000 shares of Series E Preferred Stock or Series M Preferred Stock in a primary offering and up to 8,000,000 shares of Series E Preferred Stock or Series M Preferred Stock pursuant to a dividend reinvestment plan. On February 25, 2020, we filed our prospectus with the SEC. Ashford Securities, a subsidiary of Ashford Inc., serves as the dealer manager and wholesaler of the Series E Preferred Stock and Series M Preferred Stock. On April 2, 2021, the Company filed with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”) articles supplementary to the Company’s Articles of Amendment and Restatement that provided for: (i) reclassifying the existing 28,000,000 shares of Series E Preferred Stock and 28,000,000 shares of Series M Preferred Stock as unissued shares of preferred stock; (ii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series E Preferred Stock (the “Series E Articles Supplementary”); and (iii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series M Preferred Stock (the “Series M Articles Supplementary”). The Series E Articles Supplementary and Series M Articles Supplementary were filed to revise the preferred stock terms related to the dividend rate, our optional redemption right and certain other voting rights. The Company also caused its operating partnership to execute Amendment No. 5 to the Third Amended and Restated Agreement of Limited Partnership to amend the terms of its operating partnership agreement to conform to the terms of the Series E Articles Supplementary and Series M Articles Supplementary. In total, the Company issued approximately 16.4 million shares of Series E Preferred Stock and received net proceeds of approximately $369.5 million and issued approximately 2.0 million shares of Series M Preferred Stock and received net proceeds of approximately $47.6 million. On February 21, 2023, the Company announced the closing of its offering of the Series E Preferred Stock and Series M Preferred Stock. On May 3, 2024, our board of directors approved a new share repurchase program, pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share, having an aggregate value of up to $50 million. The Company may repurchase shares through open market transactions, privately negotiated transactions or other means. The timing and amount of any transactions will be subject to the discretion of the Company based upon market conditions, and the program may be suspended or terminated at any time by the Company at its discretion without prior notice. The board of directors’ authorization replaced any previous repurchase authorizations. As of August 4, 2026, the Company has not repurchased any common stock pursuant to the plan. Debt Transactions On May 26, 2026, the Company sold the Park Hyatt Beaver Creek Resort & Spa for $176 million in cash, subject to customary pro-rations and adjustments. Additionally, the Company repaid the $70.5 million mortgage loan that was secured by the hotel property. On June 1, 2026 the Company repaid its $86.3 million Convertible Senior Notes in full. On June 25, 2026 the Company extended its $43.4 million mortgage loan secured by The Ritz-Carlton Lake Tahoe. The loan had an initial maturity date of July 15, 2026 and now has a maturity date of October 15, 2026. An additional three-month maturity extension is also available at the Company’s discretion on the same terms. On July 14, 2026, the Company completed the sale of the Ritz-Carlton Sarasota, the Bardessono Hotel and Spa and the Hotel Yountville for a purchase price of $437.5 million in cash, subject to customary pro-rations and adjustments. Additionally, the Company repaid approximately $232.8 million on the mortgage loan that was partially secured by the hotel properties. 51 Sources and Uses of Cash We had approximately $98.2 million (inclusive of amounts held for sale) and $124.4 million of cash and cash equivalents at June 30, 2026 and December 31, 2025, respectively. We anticipate that our principal sources of funds to meet our cash requirements will include cash on hand, positive cash flow from operations and capital market activities. Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities were $42.9 million and $38.2 million for the six months ended June 30, 2026 and 2025, respectively. Cash flows from operations were impacted by changes in hotel operations and the disposition of hotel properties. Cash flows from operations are also impacted by the timing of working capital cash flows, such as collecting receivables from hotel guests, paying vendors, settling with related parties and settling with hotel managers. Net Cash Flows Provided by (Used in) Investing Activities . For the six months ended June 30, 2026, net cash flows provided by investing activities were $152.2 million. Cash inflows consisted of net proceeds from the sale of the Park Hyatt Beaver Creek Resort & Spa of $169.2 million, $716,000 from property insurance proceeds and $58,000 from the sale of OpenKey. These cash inflows were partially offset by cash outflows of $17.8 million from capital improvements made to various hotel properties. Our capital improvements consisted of approximately $12.8 million of return on investment capital projects and approximately $5.0 million of renewal and replacement capital projects. For the six months ended June 30, 2025, net cash flows used in investing activities were $11.7 million. Cash outflows were primarily attributable to $33.0 million of capital improvements made to various hotel properties and acquisition of land of $5.5 million, partially offset by cash inflows of $23.8 million from sale of investment in securities and $3.1 million from property insurance proceeds. Our capital improvements consisted of approximately $23.2 million of return on investment capital projects and approximately $9.9 million of renewal and replacement capital projects. Return on investment capital projects are designed to improve the positioning of our hotel properties within their markets and competitive sets. Renewal and replacement capital projects are designed to maintain the quality and competitiveness of our hotels. Net Cash Flows Provided by (Used in) Financing Activities. For the six months ended June 30, 2026, net cash flows used in financing activities were $210.0 million. Cash outflows primarily consisted of $156.8 million of repayments of indebtedness, $1.6 million of payments of loan costs and exit fees, $33.3 million for cash redemptions of Series E and Series M Preferred Stock and $18.4 million of dividend and distribution payments. For the six months ended June 30, 2025, net cash flows used in financing activities were $75.9 million. Cash outflows primarily consisted of $365.2 million of repayments of indebtedness, $40.7 million for cash redemptions of Series E and Series M preferred stock, $24.2 million of dividend and distribution payments, $8.9 million of payments of loan costs and exit fees, $508,000 to purchase interest rate caps, and $92,000 from the redemption of operating partnership units. These cash outflows were partially offset by cash inflows of $363.0 million from borrowings on indebtedness, $424,000 of proceeds from in-the-money interest rate caps and a contribution of $306,000 from a noncontrolling interest holder in a consolidated entity. Dividend Policy Our board of directors has not declared a dividend policy for 2026. The board of directors will continue to review the Company’s dividend policy. For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof. Seasonality Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as pandemics, extreme weather conditions, natural disasters, terrorist attacks or alerts, civil unrest, government shutdowns, airline strikes or reduced airline capacity, economic factors and other considerations affecting travel. To the extent that cash flows from operations and cash on hand are insufficient during any quarter due to temporary or seasonal fluctuations in lease revenue, we expect to utilize borrowings to fund distributions required to maintain our REIT status. However, we cannot make any assurances that we will make distributions in the future. 52 Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Form 10-K. There have been no material changes in these critical accounting policies. Non-GAAP Financial Measures The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO are presented to help our investors evaluate our operating performance. EBITDA is defined as net income (loss) before interest expense and amortization of loan costs, depreciation and amortization, income taxes, equity in (earnings) loss of unconsolidated entity and after the Company’s portion of EBITDA of OpenKey. In addition, we exclude impairment on real estate, (gain) loss on disposition of assets and hotel properties and the Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by NAREIT. We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable) contract assets (liabilities), transaction and conversion costs, other income/expense, write-off of loan costs and exit fees, gain/loss on insurance settlements, legal, advisory and settlement costs, advisory services incentive fee, gain/loss on extinguishment of debt, stock/unit-based compensation and the Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/ loss on derivatives. We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because they provide investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe they help investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions. EBITDA, EBITDAre and Adjusted EBITDAre as calculated by us may not be comparable to EBITDA, EBITDAre and Adjusted EBITDAre reported by other companies that do not define EBITDA, EBITDAre and Adjusted EBITDAre exactly as we define the terms. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as an indicator of liquidity. 53 The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net income (loss) $ 6,942 $ (6,841) $ 24,976 $ 3,831 Interest expense and amortization of loan costs 20,513 25,361 41,708 50,188 Depreciation and amortization 21,433 23,360 44,012 46,755 Income tax expense (benefit) 2,481 (345) 3,898 1,122 Equity in (earnings) loss of unconsolidated entity — — 31 — EBITDA 51,369 41,535 114,625 101,896 (Gain) loss on disposition of assets and hotel property (17,395) — (17,398) — EBITDAre 33,974 41,535 97,227 101,896 Amortization of favorable (unfavorable) contract assets (liabilities) 107 107 214 214 Transaction and conversion costs 1,144 471 3,819 1,166 Write-off of premiums, loan costs and exit fees 1,484 3 1,489 1,467 Realized and unrealized (gain) loss on derivatives (35) (15) (283) 183 Stock/unit-based compensation — (47) — (95) Legal, advisory and settlement costs 808 (4,626) 1,312 (4,482) Advisory services incentive fee — 188 — 270 Other (income) expense — 1,250 — 1,250 Severance 311 — 548 — Adjusted EBITDAre $ 37,793 $ 38,866 $ 104,326 $ 101,869 54 FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to common stockholders, computed in accordance with GAAP, excluding gains or losses on disposition of assets, plus impairment charges on real estate, depreciation and amortization of real estate assets, and after redeemable noncontrolling interests in the operating partnership and adjustments for unconsolidated entities. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. Our calculation of Adjusted FFO excludes transaction and conversion costs, other income/expense, write-off of premiums, loan costs and exit fees, legal, advisory and settlement costs, stock/unit-based compensation, severance, gain/loss on insurance settlements, gain/loss on extinguishment of debt, and non-cash items such as deemed dividends on redeemable preferred stock, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives and the Company’s portion of adjustments to FFO of OpenKey. FFO and Adjusted FFO exclude amounts attributable to the portion of a partnership owned by the third party. We present FFO and Adjusted FFO because we consider FFO and Adjusted FFO important supplemental measures of our operational performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and Adjusted FFO when reporting their results. FFO and Adjusted FFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and Adjusted FFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and Adjusted FFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. We consider FFO and Adjusted FFO to be appropriate measures of our ongoing normalized operating performance as a REIT. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO and Adjusted FFO do not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income or loss as an indication of our financial performance or GAAP cash flows from operating activities as a measure of our liquidity. FFO and Adjusted FFO are also not indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO and Adjusted FFO should be considered along with our net income or loss and cash flows reported in our condensed consolidated financial statements. 55 The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net income (loss) $ 6,942 $ (6,841) $ 24,976 $ 3,831 (Income) loss attributable to noncontrolling interest in consolidated entities 48 (115) 65 (51) Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership 48 1,489 (299) 1,751 Preferred dividends (7,741) (8,992) (15,781) (18,261) Deemed dividends on preferred stock (8) (1,559) (4,771) (5,835) Net income (loss) attributable to common stockholders (711) (16,018) 4,190 (18,565) Depreciation and amortization on real estate (1) 21,433 22,690 44,012 45,366 Net income (loss) attributable to redeemable noncontrolling interests in operating partnership (48) (1,489) 299 (1,751) Equity in (earnings) loss of unconsolidated entity — — 31 — (Gain) loss on disposition of assets and hotel property (17,395) — (17,398) — FFO available to common stockholders and OP unitholders 3,279 5,183 31,134 25,050 Deemed dividends on preferred stock 8 1,559 4,771 5,835 Transaction and conversion costs 1,144 471 3,819 1,166 Write-off of premiums, loan costs and exit fees 1,484 3 1,489 1,467 Unrealized (gain) loss on derivatives (33) 165 (273) 551 Stock/unit-based compensation — (47) — (95) Legal, advisory and settlement costs 808 (4,626) 1,312 (4,482) Interest expense accretion on refundable membership club deposits 120 135 255 286 Amortization of loan costs (1) 2,441 2,651 4,850 4,748 Advisory services incentive fee — 188 — 270 Other (income) expense — 1,250 — 1,250 Severance 311 — 548 — Adjusted FFO available to common stockholders and OP unitholders $ 9,562 $ 6,932 $ 47,905 $ 36,046 ____________________ (1) Net of adjustment for noncontrolling interest in consolidated entities. The following table presents the amounts of the adjustments for noncontrolling interests for each line item: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Depreciation and amortization on real estate $ — $ (670) $ — $ (1,389) Amortization of loan costs — (36) — (71) 56 The following table presents certain information related to our hotel properties as of June 30, 2026: Hotel Property Location Total Rooms Fee Simple Properties Capital Hilton Washington, D.C. 559 The Notary Hotel Philadelphia, PA 499 Sofitel Chicago Magnificent Mile Chicago, IL 415 Pier House Resort & Spa Key West, FL 142 The Ritz-Carlton St. Thomas St. Thomas, USVI 180 Hotel Yountville Yountville, CA 80 The Ritz-Carlton Sarasota Sarasota, FL 276 The Ritz-Carlton Lake Tahoe (1) Truckee, CA 170 Cameo Beverly Hills (2) Los Angeles, CA 139 The Ritz-Carlton Reserve Dorado Beach (3) Dorado, Puerto Rico 96 Four Seasons Resort Scottsdale Scottsdale, AZ 210 Ground Lease Property (4) Bardessono Hotel and Spa (5) Yountville, CA 65 Total 2,831 ________ (1) The above information does not include the operations of the voluntary rental program with respect to condominium units not owned by the Company. (2) Includes 138 hotel rooms and one residence adjacent to the hotel. (3) The above information does not include the operations of the voluntary rental program with respect to residential units not owned by the Company. (4) Some of our hotel properties are on land subject to ground leases, one of which covers the entire property. (5) The initial ground lease expires in 2065. The ground lease contains two 25-year extension options, at our election.