2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
B
B
B
B
B
B
R
R
R
R
R
R
A
A
A
A
A
A
E
E
E
E
E
E
M
M
M
M
M
M
A
A
A
A
A
A
R
R
R
R
R
R
H
H
H
H
H
H
O
O
O
O
O
O
T
T
T
T
T
T
E
E
E
E
E
E
L
L
L
L
L
L
S
S
S
S
S
S
&
&
&
&
&
&
R
R
R
R
R
R
E
E
E
E
E
E
S
S
S
S
S
S
O
O
O
O
O
O
R
R
R
R
R
R
T
T
T
T
T
T
S
S
S
S
S
S
2
2
2
2
2
0
0
0
0
0
2
2
2
2
2
2
0
2
1
1
1
1
1
1
A
A
A
A
A
N
N
N
N
N
N
N
N
N
N
U
U
U
U
U
A
A
A
A
A
L
L
L
L
L
A
N
N
U
A
L
R
R
R
R
R
E
E
E
E
E
P
P
P
P
P
O
O
O
O
O
R
R
R
R
R
T
T
T
T
T
R
E
P
O
R
T
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
3/29/22 1:49 PM
3/29/22 1:49 PM
3/29/22 1:49 PM
3/29/22 1:49 PM
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Reflecting on the prior year, the introduction and
Reflecting on the prior year, the introduction and
At the same time, we wanted to ensure the
At the same time, we wanted to ensure the
rollout of a global vaccine program towards the
rollout of a global vaccine program towards the
company did not miss any acquisition opportunities
company did not miss any acquisition opportunities
end of 2020 and the beginning of 2021 dramatically
end of 2020 and the beginning of 2021 dramatically
arising out of the stress to the industry. During the
arising out of the stress to the industry. During the
altered people’s personal and business lives.
altered people’s personal and business lives.
year, we continued to see a meaningful uptick in
year, we continued to see a meaningful uptick in
It afforded an opportunity to move to a new
It afforded an opportunity to move to a new
acquisition opportunities but remained extremely
acquisition opportunities but remained extremely
normal of increased socialization as government-
normal of increased socialization as government-
disciplined in our investment approach by only
disciplined in our investment approach by only
mandated lockdowns were gradually suspended
mandated lockdowns were gradually suspended
focusing on transactions that would be accretive
focusing on transactions that would be accretive
and instead replaced with vaccination and testing
and instead replaced with vaccination and testing
to total shareholder return.
to total shareholder return.
mandates on the local and federal levels. The year
mandates on the local and federal levels. The year
also introduced a new reality in terms of ways of
also introduced a new reality in terms of ways of
To that end, we acquired the Mr. C Beverly Hills
To that end, we acquired the Mr. C Beverly Hills
working, living, and socializing. It allowed us to
working, living, and socializing. It allowed us to
Hotel, an irreplaceable luxury property in a
Hotel, an irreplaceable luxury property in a
return to some sense of normalcy in our work and
return to some sense of normalcy in our work and
premier location in the heart of West Los Angeles.
premier location in the heart of West Los Angeles.
personal lives, although still on a limited basis.
personal lives, although still on a limited basis.
We also announced the acquisition of the Dorado
We also announced the acquisition of the Dorado
Further, massive amounts of stimulus flooded our
Further, massive amounts of stimulus flooded our
Beach, a Ritz-Carlton Reserve in Dorado, Puerto
Beach, a Ritz-Carlton Reserve in Dorado, Puerto
economy, generally providing extensive liquidity
economy, generally providing extensive liquidity
Rico, one of the most iconic luxury assets in the
Rico, one of the most iconic luxury assets in the
to consumers and badly-affected businesses.
to consumers and badly-affected businesses.
Americas. Both transactions fit nicely into our
Americas. Both transactions fit nicely into our
diversified portfolio and were consummated at
diversified portfolio and were consummated at
As a result of both the stimulus funding and
As a result of both the stimulus funding and
attractive pricing in the midst of a longer-term
attractive pricing in the midst of a longer-term
remote working trends, travel patterns changed
remote working trends, travel patterns changed
recovery trend.
recovery trend.
dramatically. Individuals increased their amount
dramatically. Individuals increased their amount
of leisure travel to resorts and leisure destinations
of leisure travel to resorts and leisure destinations
Looking forward, Braemar is well positioned to
Looking forward, Braemar is well positioned to
while continuing to restrict corporate travel for
while continuing to restrict corporate travel for
take advantage of the recovery that is continuing
take advantage of the recovery that is continuing
meetings and conventions. However, as the year
meetings and conventions. However, as the year
in the hospitality industry. With the majority
in the hospitality industry. With the majority
progressed, urban centers started to regain some
progressed, urban centers started to regain some
of our assets in very desirable resort locations
of our assets in very desirable resort locations
activity but continued to remain relatively quiet
activity but continued to remain relatively quiet
and the highest-quality portfolio in the public
and the highest-quality portfolio in the public
versus historical norms.
versus historical norms.
markets, we are a differentiated story. Our
markets, we are a differentiated story. Our
unique portfolio focused on the luxury segment,
unique portfolio focused on the luxury segment,
Amid these changes, we are pleased to report
Amid these changes, we are pleased to report
with many properties in drive-to leisure markets,
with many properties in drive-to leisure markets,
that Braemar’s business remained solid. At the
that Braemar’s business remained solid. At the
positions us to perform well in both the near term
positions us to perform well in both the near term
company level, we worked diligently to repair
company level, we worked diligently to repair
and the long term as business and group travel
and the long term as business and group travel
our balance sheet that was so badly damaged by
our balance sheet that was so badly damaged by
resumes. We are also seeing more attractive
resumes. We are also seeing more attractive
COVID-19. We replaced the massive amount of
COVID-19. We replaced the massive amount of
acquisition opportunities due to the continued
acquisition opportunities due to the continued
cash drained from the company through strategic
cash drained from the company through strategic
stress felt by certain hotel owners, as well as
stress felt by certain hotel owners, as well as
equity raising via our ATM, non-traded preferred
equity raising via our ATM, non-traded preferred
the unprecedented strength in leisure demand.
the unprecedented strength in leisure demand.
equity
equity
issuances, and continued cost-cutting
issuances, and continued cost-cutting
Further, with a portfolio that
Further, with a portfolio that
is currently
is currently
initiatives. Through our capital markets and asset
initiatives. Through our capital markets and asset
generating positive cash flow at the corporate
generating positive cash flow at the corporate
management activities, we were able to improve
management activities, we were able to improve
level, we will continue to be on offense as the
level, we will continue to be on offense as the
our balance sheet and liquidity by extending
our balance sheet and liquidity by extending
company’s profitability returns.
company’s profitability returns.
maturities, lowering our leverage, and increasing
maturities, lowering our leverage, and increasing
our cash on hand. By the end of 2021, we were
our cash on hand. By the end of 2021, we were
In closing, I’m proud of our efforts and while we
In closing, I’m proud of our efforts and while we
able to both cease our equity raising initiative
able to both cease our equity raising initiative
are still in the early stages of the recovery, we
are still in the early stages of the recovery, we
and return to being cashflow positive at the
and return to being cashflow positive at the
continue to believe that Braemar represents a
continue to believe that Braemar represents a
corporate level. As a result of this, our leverage
corporate level. As a result of this, our leverage
compelling opportunity in the lodging REIT space.
compelling opportunity in the lodging REIT space.
also returned to pre-COVID levels.
also returned to pre-COVID levels.
We see a clear path for continued, steady strength
We see a clear path for continued, steady strength
in our operating performance and remain
in our operating performance and remain
Our portfolio composition, which was already
Our portfolio composition, which was already
confident in our position to restore shareholder
confident in our position to restore shareholder
heavily weighted toward luxury resorts at the
heavily weighted toward luxury resorts at the
value as we continue to rebuild and grow the
value as we continue to rebuild and grow the
start of the pandemic served as the engine to
start of the pandemic served as the engine to
company over the course of 2022.
company over the course of 2022.
drive our liquidity and performance as many of
drive our liquidity and performance as many of
our hotels are in drive-to leisure markets and
our hotels are in drive-to leisure markets and
Thank you for your continued investment in
Thank you for your continued investment in
have been well positioned to benefit from the
have been well positioned to benefit from the
Braemar Hotels & Resorts.
Braemar Hotels & Resorts.
resurgence of pent-up
resurgence of pent-up
leisure demand. This
leisure demand. This
dynamic allowed Braemar to retain its position
dynamic allowed Braemar to retain its position
Sincerely,
Sincerely,
as the highest RevPAR lodging REIT in the sector.
as the highest RevPAR lodging REIT in the sector.
In fact, we were able to expand the gap relative
In fact, we were able to expand the gap relative
to our nearest peers, while reaching our 2019
to our nearest peers, while reaching our 2019
RevPAR levels and generating positive corporate
RevPAR levels and generating positive corporate
cashflow before them.
cashflow before them.
Richard J. Stockton
Richard J. Stockton
President & Chief Executive Officer
President & Chief Executive Officer
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
B
B
B
R
R
R
A
A
A
E
E
E
M
M
M
A
A
A
R
R
R
H
H
H
O
O
O
T
T
T
E
E
E
L
L
L
S
S
S
&
&
&
R
R
R
E
E
E
S
S
S
O
O
O
R
R
R
T
T
T
S
S
S
2
2
2
0
0
0
2
2
2
1
1
1
A
A
A
N
N
N
N
N
N
U
U
U
A
A
A
L
L
L
R
R
R
E
E
E
P
P
P
O
O
O
R
R
R
T
T
T
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
Reflecting on the prior year, the introduction and
rollout of a global vaccine program towards the
end of 2020 and the beginning of 2021 dramatically
altered people’s personal and business lives.
It afforded an opportunity to move to a new
normal of increased socialization as government-
mandated lockdowns were gradually suspended
and instead replaced with vaccination and testing
mandates on the local and federal levels. The year
also introduced a new reality in terms of ways of
working, living, and socializing. It allowed us to
return to some sense of normalcy in our work and
personal lives, although still on a limited basis.
Further, massive amounts of stimulus flooded our
economy, generally providing extensive liquidity
to consumers and badly-affected businesses.
As a result of both the stimulus funding and
remote working trends, travel patterns changed
dramatically. Individuals increased their amount
of leisure travel to resorts and leisure destinations
while continuing to restrict corporate travel for
meetings and conventions. However, as the year
progressed, urban centers started to regain some
activity but continued to remain relatively quiet
versus historical norms.
Amid these changes, we are pleased to report
that Braemar’s business remained solid. At the
company level, we worked diligently to repair
our balance sheet that was so badly damaged by
COVID-19. We replaced the massive amount of
cash drained from the company through strategic
equity raising via our ATM, non-traded preferred
issuances, and continued cost-cutting
equity
initiatives. Through our capital markets and asset
management activities, we were able to improve
our balance sheet and liquidity by extending
maturities, lowering our leverage, and increasing
our cash on hand. By the end of 2021, we were
able to both cease our equity raising initiative
and return to being cashflow positive at the
corporate level. As a result of this, our leverage
also returned to pre-COVID levels.
Our portfolio composition, which was already
heavily weighted toward luxury resorts at the
start of the pandemic served as the engine to
drive our liquidity and performance as many of
our hotels are in drive-to leisure markets and
have been well positioned to benefit from the
resurgence of pent-up
leisure demand. This
dynamic allowed Braemar to retain its position
as the highest RevPAR lodging REIT in the sector.
In fact, we were able to expand the gap relative
to our nearest peers, while reaching our 2019
RevPAR levels and generating positive corporate
cashflow before them.
At the same time, we wanted to ensure the
company did not miss any acquisition opportunities
arising out of the stress to the industry. During the
year, we continued to see a meaningful uptick in
acquisition opportunities but remained extremely
disciplined in our investment approach by only
focusing on transactions that would be accretive
to total shareholder return.
To that end, we acquired the Mr. C Beverly Hills
Hotel, an irreplaceable luxury property in a
premier location in the heart of West Los Angeles.
We also announced the acquisition of the Dorado
Beach, a Ritz-Carlton Reserve in Dorado, Puerto
Rico, one of the most iconic luxury assets in the
Americas. Both transactions fit nicely into our
diversified portfolio and were consummated at
attractive pricing in the midst of a longer-term
recovery trend.
Looking forward, Braemar is well positioned to
take advantage of the recovery that is continuing
in the hospitality industry. With the majority
of our assets in very desirable resort locations
and the highest-quality portfolio in the public
markets, we are a differentiated story. Our
unique portfolio focused on the luxury segment,
with many properties in drive-to leisure markets,
positions us to perform well in both the near term
and the long term as business and group travel
resumes. We are also seeing more attractive
acquisition opportunities due to the continued
stress felt by certain hotel owners, as well as
the unprecedented strength in leisure demand.
is currently
Further, with a portfolio that
generating positive cash flow at the corporate
level, we will continue to be on offense as the
company’s profitability returns.
In closing, I’m proud of our efforts and while we
are still in the early stages of the recovery, we
continue to believe that Braemar represents a
compelling opportunity in the lodging REIT space.
We see a clear path for continued, steady strength
in our operating performance and remain
confident in our position to restore shareholder
value as we continue to rebuild and grow the
company over the course of 2022.
Thank you for your continued investment in
Braemar Hotels & Resorts.
Sincerely,
Richard J. Stockton
President & Chief Executive Officer
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
3/29/22 1:49 PM
3/29/22 1:49 PM
Gallery
Gallery
The Ritz-Carlton Lake Tahoe
Truckee, CA
The Ritz-Carlton Lake Tahoe
Truckee, CA
Pier House Resort
Pier House Resort
Key West, FL
Key West, FL
The Notary Hotel
Philadelphia, PA
The Notary Hotel
Philadelphia, PA
The Capital Hilton
Washington, DC
The Capital Hilton
Washington, DC
Hotel Yountville
Yountville, CA
Hotel Yountville
Yountville, CA
Bardessono Hotel and Spa
Bardessono Hotel and Spa
Yountville, CA
Yountville, CA
The Ritz-Carlton Reserve Dorado Beach
Dorado, Puerto Rico
The Ritz-Carlton Reserve Dorado Beach
Dorado, Puerto Rico
The Ritz-Carlton Sarasota
The Ritz-Carlton Sarasota
Sarasota, FL
Sarasota, FL
Sofitel Chicago Magnificent Mile
Sofitel Chicago Magnificent Mile
Chicago, IL
Chicago, IL
The Clancy
The Clancy
San Francisco, CA
San Francisco, CA
Mr. C Beverly Hills
Beverly Hills, CA
Mr. C Beverly Hills
Beverly Hills, CA
Park Hyatt Beaver Creek
Beaver Creek, CO
Park Hyatt Beaver Creek
Beaver Creek, CO
The Ritz-Carlton St. Thomas
The Ritz-Carlton St. Thomas
St. Thomas, USVI
St. Thomas, USVI
Marriott Seattle
Marriott Seattle
Seattle, WA
Seattle, WA
Hilton La Jolla Torrey Pines
Hilton La Jolla Torrey Pines
La Jolla, CA
La Jolla, CA
Annual Meeting
Annual Meeting
Annual Meeting
Annual Meeting
The annual meeting of shareholders will be
The annual meeting of shareholders will be
The annual meeting of shareholders will be
The annual meeting of shareholders will be
held on July 3, 2018, at 9:00 a.m. (local
held on July 3, 2018, at 9:00 a.m. (local
held on May 11, 2022, at 9:00 a.m. CT
held on May 11, 2022, at 9:00 a.m. CT
time) at the Dallas/Fort Worth Airport Marriott
time) at the Dallas/Fort Worth Airport Marriott
at the Renaissance Nashville Hotel
at the Renaissance Nashville Hotel
8440 Freeport Parkway Irving, TX 75063
8440 Freeport Parkway Irving, TX 75063
611 Commerce Street, Nashville, TN 37203
611 Commerce Street, Nashville, TN 37203
Shareholders of record as of the close
Shareholders of record as of the close
Shareholders of record as of the close of
Shareholders of record as of the close of
of business on May 15, 2018 will be
of business on May 15, 2018 will be
business on March 11, 2022 will be
business on March 11, 2022 will be
entitled to vote at this meeting.
entitled to vote at this meeting.
entitled to vote at this meeting.
entitled to vote at this meeting.
Officers and Directors
Officers and Directors
Officers and Directors
Officers and Directors
Corporate Information
Corporate Information
Corporate Information
Corporate Information
OFFICERS
OFFICERS
OFFICERS
OFFICERS
Richard J. Stockton
Richard J. Stockton
Richard J. Stockton
Richard J. Stockton
Chief Executive Officer
Chief Executive Officer
Chief Executive Officer
Chief Executive Officer
& President
& President
& President
& President
Deric S. Eubanks
Deric S. Eubanks
Deric S. Eubanks
Deric S. Eubanks
Chief Financial Officer and Treasurer
Chief Financial Officer and Treasurer
Chief Financial Officer and Treasurer
Chief Financial Officer and Treasurer
Mark L. Nunneley
Mark L. Nunneley
Mark L. Nunneley
Mark L. Nunneley
Chief Accounting Officer
Chief Accounting Officer
Chief Accounting Officer
Chief Accounting Officer
J. Robison Hays III
Jeremy J. Welter
J. Robison Hays III
Jeremy J. Welter
Chief Strategy Officer
Chief Operating Officer
Chief Strategy Officer
Chief Operating Officer
Jeremy J. Welter
Jeremy J. Welter
Alex Rose
Alex Rose
Chief Operating Officer
Executive Vice President,
Chief Operating Officer
Executive Vice President,
General Counsel & Secretary
General Counsel & Secretary
Corporate Office
Corporate Office
Corporate Office
Corporate Office
Ashford Hospitality Prime, Inc.
Braemar Hotels & Resorts Inc.
Ashford Hospitality Prime, Inc.
Braemar Hotels & Resorts Inc.
14185 Dallas Parkway, Suite 1100
14185 Dallas Parkway, Suite 1200
14185 Dallas Parkway, Suite 1100
14185 Dallas Parkway, Suite 1200
Dallas, Texas 75254
Dallas, Texas 75254
Dallas, Texas 75254
Dallas, Texas 75254
Telephone: (972) 490-9600
Telephone: (972) 490-9600
Telephone: (972) 490-9600
Telephone: (972) 490-9600
www.ahpreit.com
www.bhrreit.com
www.ahpreit.com
www.bhrreit.com
Registrar and Transfer Agent
Registrar and Transfer Agent
Registrar and Transfer Agent
Registrar and Transfer Agent
Computershare Trust Company, N.A.
Computershare Trust Company, N.A.
Computershare Trust Company, N.A.
Computershare Trust Company, N.A.
Canton, Massachusetts
Canton, Massachusetts
Canton, Massachusetts
Canton, Massachusetts
Independent Auditors
Independent Auditors
Independent Auditors
Independent Auditors
BDO USA, LLP
BDO USA, LLP
BDO USA, LLP
BDO USA, LLP
Dallas, Texas
Dallas, Texas
Dallas, Texas
Dallas, Texas
Legal Counsel
Legal Counsel
Legal Counsel
Legal Counsel
Hunton Andrews Kurth, LLP
Cadwalader, Wickersham & Taft, LLP
Cadwalader, Wickersham & Taft, LLP
Hunton Andrews Kurth, LLP
Dallas, Texas
New York, New York
New York, New York
Dallas, Texas
BOARD OF DIRECTORS
BOARD OF DIRECTORS
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Annual Report on Form
Annual Report on Form
Annual Report on Form
Annual Report on Form
10-K/Investor Contact
10-K/Investor Contact
10-K/Investor Contact
10-K/Investor Contact
Monty J. Bennett
Monty J. Bennett
Monty J. Bennett
Chairman of the Board
Monty J. Bennett
Chairman of the Board
Chairman of the Board
Chairman of the Board
Stefani D. Carter
Stefani D. Carter
Stefani D. Carter
Stefani D. Carter
Senior Counsel
Senior Counsel
Litigation Shareholder
Estes Thorne & Carr PLLC
Estes Thorne & Carr PLLC
Litigation Shareholder
Ferguson Braswell Fraser Kubasta PC
Ferguson Braswell Fraser Kubasta PC
Kenneth H. Fearn
Kenneth H. Fearn
Mary C. Evans
Managing Partner
Mary C. Evans
Managing Partner
Founder & Publisher
Integrated Capital
Founder & Publisher
Integrated Capital
CandysDirt.com & SecondShelters.com
CandysDirt.com & SecondShelters.com
Curtis B. McWilliams
Curtis B. McWilliams
Kenneth H. Fearn JR.
Kenneth H. Fearn JR.
President & CEO
President & CEO
Managing Partner
CNL Real Estate Advisors, Inc (Retired)
CNL Real Estate Advisors, Inc (Retired)
Managing Partner
Integrated Capital
Integrated Capital
Matthew D. Rinaldi
Matthew D. Rinaldi
General Counsel
Curtis B. McWilliams
Curtis B. McWilliams
General Counsel
Quantas Healthcare Management
Quantas Healthcare Management
Interim CEO
Interim CEO
Kalera Inc
Kalera Inc
Abteen Vaziri
Abteen Vaziri
Managing Director
Managing Director
Matthew D. Rinaldi
Matthew D. Rinaldi
Brevet Capital Management
Brevet Capital Management
General Counsel
General Counsel
Quantas Healthcare Management
Quantas Healthcare Management
Richard J. Stockton
Richard J. Stockton
Chief Executive Officer
Chief Executive Officer
& President
& President
Abteen Vaziri
Abteen Vaziri
Managing Director
Managing Director
Brevet Capital Management
Brevet Capital Management
A copy of the Ashford Hospitality Prime Annual
A copy of the Braemar Hotels & Resorts Annual
A copy of the Ashford Hospitality Prime Annual
A copy of the Braemar Hotels & Resorts Annual
Report on Form 10-K for fiscal 2017, was filed
Report on Form 10-K for fiscal 2021, was filed
Report on Form 10-K for fiscal 2017, was filed
Report on Form 10-K for fiscal 2021, was filed
with the Securities and Exchange Commission
with the Securities and Exchange Commission
with the Securities and Exchange Commission
with the Securities and Exchange Commission
on March 8, 2019 is included with this
on March 10, 2022 is included with this report.
on March 10, 2022 is included with this report.
on March 8, 2019 is included with this
report. Additional copies of the report and
Additional copies of the report and copies of
report. Additional copies of the report and
Additional copies of the report and copies of
copies of the exhibits referenced therein are
the exhibits referenced therein are available
copies of the exhibits referenced therein are
the exhibits referenced therein are available
available from the Company. Requests for
from the Company. Requests for these items
from the Company. Requests for these items
available from the Company. Requests for
these items and other investor contacts should
and other investor contacts should be directed
these items and other investor contacts should
and other investor contacts should be directed
be directed to Joseph Calabrese of Financial
to Joseph Calabrese of Financial Relations
be directed to Joseph Calabrese of Financial
to Joseph Calabrese of Financial Relations
Relations Board at (212) 827-3772.
Relations Board at (212) 827-3772.
Board at (212) 827-3772.
Board at (212) 827-3772.
Forward-Looking Statements
Forward-Looking Statements
Forward-Looking Statements
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the federal securities
This report contains forward-looking statements within the meaning of the federal securities
This report contains forward-looking statements within the meaning of the federal securities
This report contains forward-looking statements within the meaning of the federal securities
laws. Ashford Hospitality Prime, Inc. (the “Company” or “we” or “our”) cautions investors that
laws. Braemar Hotels & Resorts, Inc (the “Company” or “we” or “our”) cautions investors that
laws. Ashford Hospitality Prime, Inc. (the “Company” or “we” or “our”) cautions investors that
laws. Braemar Hotels & Resorts, Inc (the “Company” or “we” or “our”) cautions investors that
any forward-looking statements presented herein, or which management may make orally or
any forward-looking statements presented herein, or which management may make orally or
any forward-looking statements presented herein, or which management may make orally or
any forward-looking statements presented herein, or which management may make orally or
in writing from time to time, are based on management’s beliefs and assumptions at that time.
in writing from time to time, are based on management’s beliefs and assumptions at that time.
in writing from time to time, are based on management’s beliefs and assumptions at that time.
in writing from time to time, are based on management’s beliefs and assumptions at that time.
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
which do not relate solely to historical matters, are intended to identify forward-looking
which do not relate solely to historical matters, are intended to identify forward-looking
which do not relate solely to historical matters, are intended to identify forward-looking
which do not relate solely to historical matters, are intended to identify forward-looking
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
guarantees of future performance, which may be affected by known and unknown risks, trends,
guarantees of future performance, which may be affected by known and unknown risks, trends,
guarantees of future performance, which may be affected by known and unknown risks, trends,
guarantees of future performance, which may be affected by known and unknown risks, trends,
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated, or projected. We caution investors that while forward-looking
from those anticipated, estimated, or projected. We caution investors that while forward-looking
from those anticipated, estimated, or projected. We caution investors that while forward-looking
from those anticipated, estimated, or projected. We caution investors that while forward-looking
statements reflect our good faith beliefs at the time they are made, such statements
statements reflect our good faith beliefs at the time they are made, such statements
statements reflect our good faith beliefs at the time they are made, such statements
statements reflect our good faith beliefs at the time they are made, such statements
are not guarantees of future performance and are impacted by actual events that occur after
are not guarantees of future performance and are impacted by actual events that occur after
are not guarantees of future performance and are impacted by actual events that occur after
are not guarantees of future performance and are impacted by actual events that occur after
such statements are made. We expressly disclaim any responsibility to update forward-looking
such statements are made. We expressly disclaim any responsibility to update forward-looking
such statements are made. We expressly disclaim any responsibility to update forward-looking
such statements are made. We expressly disclaim any responsibility to update forward-looking
statements, whether as a result of new information, future events, or otherwise. Accordingly,
statements, whether as a result of new information, future events, or otherwise. Accordingly,
statements, whether as a result of new information, future events, or otherwise. Accordingly,
statements, whether as a result of new information, future events, or otherwise. Accordingly,
investors should use caution in relying on past forward-looking statements, which are based on
investors should use caution in relying on past forward-looking statements, which are based on
investors should use caution in relying on past forward-looking statements, which are based on
investors should use caution in relying on past forward-looking statements, which are based on
results and trends at the time they are made, to anticipate future results or trends.
results and trends at the time they are made, to anticipate future results or trends.
results and trends at the time they are made, to anticipate future results or trends.
results and trends at the time they are made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results, performance, or
Some of the risks and uncertainties that may cause our actual results, performance, or
Some of the risks and uncertainties that may cause our actual results, performance, or
Some of the risks and uncertainties that may cause our actual results, performance, or
achievements to differ materially from those expressed or implied by forward-looking statements
achievements to differ materially from those expressed or implied by forward-looking statements
achievements to differ materially from those expressed or implied by forward-looking statements
achievements to differ materially from those expressed or implied by forward-looking statements
include, among others, those discussed in our Annual Report on Form 10-K under the heading
include, among others, those discussed in our Annual Report on Form 10-K under the heading
include, among others, those discussed in our Annual Report on Form 10-K under the heading
include, among others, those discussed in our Annual Report on Form 10-K under the heading
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
where new risk factors emerge from time to time. It is not possible for management to predict all
where new risk factors emerge from time to time. It is not possible for management to predict all
where new risk factors emerge from time to time. It is not possible for management to predict all
where new risk factors emerge from time to time. It is not possible for management to predict all
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
to which any factor, or combination of factors, may cause actual results to differ materially from
to which any factor, or combination of factors, may cause actual results to differ materially from
to which any factor, or combination of factors, may cause actual results to differ materially from
to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Given these risks and uncertainties, investors
those contained in any forward-looking statements. Given these risks and uncertainties, investors
those contained in any forward-looking statements. Given these risks and uncertainties, investors
those contained in any forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction of actual results.
should not place undue reliance on forward-looking statements as a prediction of actual results.
should not place undue reliance on forward-looking statements as a prediction of actual results.
should not place undue reliance on forward-looking statements as a prediction of actual results.
Braemar Hotels and Resorts Cover 3-29-22.indd 2
Braemar Hotels and Resorts Cover 3-29-22.indd 2
Braemar Hotels and Resorts Cover 3-29-22.indd 2
Braemar Hotels and Resorts Cover 3-29-22.indd 2
3/29/22 1:50 PM
3/29/22 1:50 PM
3/29/22 1:50 PM
3/29/22 1:50 PM
Gallery
Gallery
The Ritz-Carlton Lake Tahoe
The Ritz-Carlton Lake Tahoe
Truckee, CA
Truckee, CA
Pier House Resort
Key West, FL
Pier House Resort
Key West, FL
The Notary Hotel
The Notary Hotel
Philadelphia, PA
Philadelphia, PA
The Capital Hilton
The Capital Hilton
Washington, DC
Washington, DC
Hotel Yountville
Hotel Yountville
Yountville, CA
Yountville, CA
Bardessono Hotel and Spa
Bardessono Hotel and Spa
The Ritz-Carlton Reserve Dorado Beach
The Ritz-Carlton Reserve Dorado Beach
Yountville, CA
Yountville, CA
Dorado, Puerto Rico
Dorado, Puerto Rico
The Ritz-Carlton Sarasota
Sarasota, FL
The Ritz-Carlton Sarasota
Sarasota, FL
Sofitel Chicago Magnificent Mile
Chicago, IL
Sofitel Chicago Magnificent Mile
Chicago, IL
The Clancy
San Francisco, CA
The Clancy
San Francisco, CA
Mr. C Beverly Hills
Mr. C Beverly Hills
Beverly Hills, CA
Beverly Hills, CA
Park Hyatt Beaver Creek
Park Hyatt Beaver Creek
Beaver Creek, CO
Beaver Creek, CO
The Ritz-Carlton St. Thomas
The Ritz-Carlton St. Thomas
St. Thomas, USVI
St. Thomas, USVI
Marriott Seattle
Seattle, WA
Marriott Seattle
Seattle, WA
Hilton La Jolla Torrey Pines
La Jolla, CA
Hilton La Jolla Torrey Pines
La Jolla, CA
Corporate Office
Corporate Office
Corporate Office
Corporate Office
Annual Meeting
Annual Meeting
Annual Meeting
Annual Meeting
The annual meeting of shareholders will be
The annual meeting of shareholders will be
The annual meeting of shareholders will be
The annual meeting of shareholders will be
held on July 3, 2018, at 9:00 a.m. (local
held on May 11, 2022, at 9:00 a.m. CT
held on July 3, 2018, at 9:00 a.m. (local
held on May 11, 2022, at 9:00 a.m. CT
time) at the Dallas/Fort Worth Airport Marriott
time) at the Dallas/Fort Worth Airport Marriott
at the Renaissance Nashville Hotel
at the Renaissance Nashville Hotel
8440 Freeport Parkway Irving, TX 75063
8440 Freeport Parkway Irving, TX 75063
611 Commerce Street, Nashville, TN 37203
611 Commerce Street, Nashville, TN 37203
Shareholders of record as of the close
Shareholders of record as of the close
Shareholders of record as of the close of
Shareholders of record as of the close of
of business on May 15, 2018 will be
of business on May 15, 2018 will be
business on March 11, 2022 will be
business on March 11, 2022 will be
entitled to vote at this meeting.
entitled to vote at this meeting.
entitled to vote at this meeting.
entitled to vote at this meeting.
Officers and Directors
Officers and Directors
Officers and Directors
Officers and Directors
Corporate Information
Corporate Information
Corporate Information
Corporate Information
OFFICERS
OFFICERS
OFFICERS
OFFICERS
Richard J. Stockton
Richard J. Stockton
Richard J. Stockton
Richard J. Stockton
Chief Executive Officer
Chief Executive Officer
Chief Executive Officer
Chief Executive Officer
& President
& President
& President
& President
Deric S. Eubanks
Deric S. Eubanks
Deric S. Eubanks
Deric S. Eubanks
Chief Financial Officer and Treasurer
Chief Financial Officer and Treasurer
Chief Financial Officer and Treasurer
Chief Financial Officer and Treasurer
Mark L. Nunneley
Mark L. Nunneley
Mark L. Nunneley
Mark L. Nunneley
Chief Accounting Officer
Chief Accounting Officer
Chief Accounting Officer
Chief Accounting Officer
J. Robison Hays III
Jeremy J. Welter
J. Robison Hays III
Jeremy J. Welter
Chief Strategy Officer
Chief Operating Officer
Chief Strategy Officer
Chief Operating Officer
Ashford Hospitality Prime, Inc.
Braemar Hotels & Resorts Inc.
Ashford Hospitality Prime, Inc.
Braemar Hotels & Resorts Inc.
14185 Dallas Parkway, Suite 1100
14185 Dallas Parkway, Suite 1200
14185 Dallas Parkway, Suite 1100
14185 Dallas Parkway, Suite 1200
Dallas, Texas 75254
Dallas, Texas 75254
Dallas, Texas 75254
Dallas, Texas 75254
Telephone: (972) 490-9600
Telephone: (972) 490-9600
Telephone: (972) 490-9600
Telephone: (972) 490-9600
www.ahpreit.com
www.bhrreit.com
www.ahpreit.com
www.bhrreit.com
Registrar and Transfer Agent
Registrar and Transfer Agent
Registrar and Transfer Agent
Registrar and Transfer Agent
Computershare Trust Company, N.A.
Computershare Trust Company, N.A.
Computershare Trust Company, N.A.
Computershare Trust Company, N.A.
Canton, Massachusetts
Canton, Massachusetts
Canton, Massachusetts
Canton, Massachusetts
Independent Auditors
Independent Auditors
Independent Auditors
Independent Auditors
BDO USA, LLP
BDO USA, LLP
BDO USA, LLP
BDO USA, LLP
Dallas, Texas
Dallas, Texas
Dallas, Texas
Dallas, Texas
Jeremy J. Welter
Alex Rose
Jeremy J. Welter
Alex Rose
Chief Operating Officer
Executive Vice President,
Chief Operating Officer
Executive Vice President,
General Counsel & Secretary
General Counsel & Secretary
Legal Counsel
Legal Counsel
Legal Counsel
Legal Counsel
Hunton Andrews Kurth, LLP
Cadwalader, Wickersham & Taft, LLP
Hunton Andrews Kurth, LLP
Cadwalader, Wickersham & Taft, LLP
Dallas, Texas
New York, New York
Dallas, Texas
New York, New York
BOARD OF DIRECTORS
BOARD OF DIRECTORS
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Annual Report on Form
Annual Report on Form
Annual Report on Form
Annual Report on Form
10-K/Investor Contact
10-K/Investor Contact
10-K/Investor Contact
10-K/Investor Contact
Monty J. Bennett
Monty J. Bennett
Monty J. Bennett
Chairman of the Board
Monty J. Bennett
Chairman of the Board
Chairman of the Board
Chairman of the Board
Stefani D. Carter
Stefani D. Carter
Stefani D. Carter
Senior Counsel
Stefani D. Carter
Senior Counsel
Litigation Shareholder
Estes Thorne & Carr PLLC
Litigation Shareholder
Estes Thorne & Carr PLLC
Ferguson Braswell Fraser Kubasta PC
Ferguson Braswell Fraser Kubasta PC
Kenneth H. Fearn
Kenneth H. Fearn
Mary C. Evans
Managing Partner
Mary C. Evans
Managing Partner
Founder & Publisher
Integrated Capital
Founder & Publisher
Integrated Capital
CandysDirt.com & SecondShelters.com
CandysDirt.com & SecondShelters.com
Curtis B. McWilliams
Curtis B. McWilliams
Kenneth H. Fearn JR.
Kenneth H. Fearn JR.
President & CEO
President & CEO
Managing Partner
CNL Real Estate Advisors, Inc (Retired)
CNL Real Estate Advisors, Inc (Retired)
Managing Partner
Integrated Capital
Integrated Capital
Matthew D. Rinaldi
Matthew D. Rinaldi
General Counsel
Curtis B. McWilliams
General Counsel
Curtis B. McWilliams
Quantas Healthcare Management
Quantas Healthcare Management
Interim CEO
Interim CEO
Kalera Inc
Kalera Inc
Abteen Vaziri
Abteen Vaziri
Managing Director
Matthew D. Rinaldi
Matthew D. Rinaldi
Managing Director
Brevet Capital Management
Brevet Capital Management
General Counsel
General Counsel
Quantas Healthcare Management
Quantas Healthcare Management
Richard J. Stockton
Richard J. Stockton
Chief Executive Officer
Chief Executive Officer
& President
& President
Abteen Vaziri
Abteen Vaziri
Managing Director
Managing Director
Brevet Capital Management
Brevet Capital Management
A copy of the Ashford Hospitality Prime Annual
A copy of the Braemar Hotels & Resorts Annual
A copy of the Ashford Hospitality Prime Annual
A copy of the Braemar Hotels & Resorts Annual
Report on Form 10-K for fiscal 2017, was filed
Report on Form 10-K for fiscal 2021, was filed
Report on Form 10-K for fiscal 2017, was filed
Report on Form 10-K for fiscal 2021, was filed
with the Securities and Exchange Commission
with the Securities and Exchange Commission
with the Securities and Exchange Commission
with the Securities and Exchange Commission
on March 8, 2019 is included with this
on March 10, 2022 is included with this report.
on March 8, 2019 is included with this
on March 10, 2022 is included with this report.
report. Additional copies of the report and
Additional copies of the report and copies of
report. Additional copies of the report and
Additional copies of the report and copies of
copies of the exhibits referenced therein are
the exhibits referenced therein are available
copies of the exhibits referenced therein are
the exhibits referenced therein are available
available from the Company. Requests for
from the Company. Requests for these items
available from the Company. Requests for
from the Company. Requests for these items
these items and other investor contacts should
and other investor contacts should be directed
these items and other investor contacts should
and other investor contacts should be directed
be directed to Joseph Calabrese of Financial
to Joseph Calabrese of Financial Relations
be directed to Joseph Calabrese of Financial
to Joseph Calabrese of Financial Relations
Relations Board at (212) 827-3772.
Board at (212) 827-3772.
Relations Board at (212) 827-3772.
Board at (212) 827-3772.
Forward-Looking Statements
Forward-Looking Statements
Forward-Looking Statements
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the federal securities
This report contains forward-looking statements within the meaning of the federal securities
This report contains forward-looking statements within the meaning of the federal securities
This report contains forward-looking statements within the meaning of the federal securities
laws. Ashford Hospitality Prime, Inc. (the “Company” or “we” or “our”) cautions investors that
laws. Braemar Hotels & Resorts, Inc (the “Company” or “we” or “our”) cautions investors that
laws. Ashford Hospitality Prime, Inc. (the “Company” or “we” or “our”) cautions investors that
laws. Braemar Hotels & Resorts, Inc (the “Company” or “we” or “our”) cautions investors that
any forward-looking statements presented herein, or which management may make orally or
any forward-looking statements presented herein, or which management may make orally or
any forward-looking statements presented herein, or which management may make orally or
any forward-looking statements presented herein, or which management may make orally or
in writing from time to time, are based on management’s beliefs and assumptions at that time.
in writing from time to time, are based on management’s beliefs and assumptions at that time.
in writing from time to time, are based on management’s beliefs and assumptions at that time.
in writing from time to time, are based on management’s beliefs and assumptions at that time.
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
which do not relate solely to historical matters, are intended to identify forward-looking
which do not relate solely to historical matters, are intended to identify forward-looking
which do not relate solely to historical matters, are intended to identify forward-looking
which do not relate solely to historical matters, are intended to identify forward-looking
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
guarantees of future performance, which may be affected by known and unknown risks, trends,
guarantees of future performance, which may be affected by known and unknown risks, trends,
guarantees of future performance, which may be affected by known and unknown risks, trends,
guarantees of future performance, which may be affected by known and unknown risks, trends,
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated, or projected. We caution investors that while forward-looking
from those anticipated, estimated, or projected. We caution investors that while forward-looking
from those anticipated, estimated, or projected. We caution investors that while forward-looking
from those anticipated, estimated, or projected. We caution investors that while forward-looking
statements reflect our good faith beliefs at the time they are made, such statements
statements reflect our good faith beliefs at the time they are made, such statements
statements reflect our good faith beliefs at the time they are made, such statements
statements reflect our good faith beliefs at the time they are made, such statements
are not guarantees of future performance and are impacted by actual events that occur after
are not guarantees of future performance and are impacted by actual events that occur after
are not guarantees of future performance and are impacted by actual events that occur after
are not guarantees of future performance and are impacted by actual events that occur after
such statements are made. We expressly disclaim any responsibility to update forward-looking
such statements are made. We expressly disclaim any responsibility to update forward-looking
such statements are made. We expressly disclaim any responsibility to update forward-looking
such statements are made. We expressly disclaim any responsibility to update forward-looking
statements, whether as a result of new information, future events, or otherwise. Accordingly,
statements, whether as a result of new information, future events, or otherwise. Accordingly,
statements, whether as a result of new information, future events, or otherwise. Accordingly,
statements, whether as a result of new information, future events, or otherwise. Accordingly,
investors should use caution in relying on past forward-looking statements, which are based on
investors should use caution in relying on past forward-looking statements, which are based on
investors should use caution in relying on past forward-looking statements, which are based on
investors should use caution in relying on past forward-looking statements, which are based on
results and trends at the time they are made, to anticipate future results or trends.
results and trends at the time they are made, to anticipate future results or trends.
results and trends at the time they are made, to anticipate future results or trends.
results and trends at the time they are made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results, performance, or
Some of the risks and uncertainties that may cause our actual results, performance, or
Some of the risks and uncertainties that may cause our actual results, performance, or
Some of the risks and uncertainties that may cause our actual results, performance, or
achievements to differ materially from those expressed or implied by forward-looking statements
achievements to differ materially from those expressed or implied by forward-looking statements
achievements to differ materially from those expressed or implied by forward-looking statements
achievements to differ materially from those expressed or implied by forward-looking statements
include, among others, those discussed in our Annual Report on Form 10-K under the heading
include, among others, those discussed in our Annual Report on Form 10-K under the heading
include, among others, those discussed in our Annual Report on Form 10-K under the heading
include, among others, those discussed in our Annual Report on Form 10-K under the heading
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
where new risk factors emerge from time to time. It is not possible for management to predict all
where new risk factors emerge from time to time. It is not possible for management to predict all
where new risk factors emerge from time to time. It is not possible for management to predict all
where new risk factors emerge from time to time. It is not possible for management to predict all
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
to which any factor, or combination of factors, may cause actual results to differ materially from
to which any factor, or combination of factors, may cause actual results to differ materially from
to which any factor, or combination of factors, may cause actual results to differ materially from
to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Given these risks and uncertainties, investors
those contained in any forward-looking statements. Given these risks and uncertainties, investors
those contained in any forward-looking statements. Given these risks and uncertainties, investors
those contained in any forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction of actual results.
should not place undue reliance on forward-looking statements as a prediction of actual results.
should not place undue reliance on forward-looking statements as a prediction of actual results.
should not place undue reliance on forward-looking statements as a prediction of actual results.
Braemar Hotels and Resorts Cover 3-29-22.indd 2
Braemar Hotels and Resorts Cover 3-29-22.indd 2
Braemar Hotels and Resorts Cover 3-29-22.indd 2
Braemar Hotels and Resorts Cover 3-29-22.indd 2
3/29/22 1:50 PM
3/29/22 1:50 PM
3/29/22 1:50 PM
3/29/22 1:50 PM
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number: 001-35972
BRAEMAR HOTELS & RESORTS INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation or organization)
46-2488594
(IRS employer identification number)
14185 Dallas Parkway
Suite 1200
Dallas
Texas
(Address of principal executive offices)
75254
(Zip code)
Securities registered pursuant to Section 12(b) of the Act:
(972) 490-9600
(Registrant’s telephone number, including area code)
Title of each class
Common Stock
Preferred Stock, Series B
Preferred Stock, Series D
Trading Symbol(s)
BHR
BHR-PB
BHR-PD
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes
þ No
þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. þ
¨ No
Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
¨ No
þ
Yes
Large accelerated filer
Non-accelerated filer
☐
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☑
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐
þ No
Yes
As of June 30, 2021, the aggregate market value of 55,902,246 shares of the registrant’s common stock held by non-affiliates was
approximately $347,153,000.
As of March 8, 2022, the registrant had 65,348,848 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement pertaining to the 2022 Annual Meeting of Stockholders are incorporated herein by reference
into Part III of this Form 10-K.
BRAEMAR HOTELS & RESORTS INC.
YEAR ENDED DECEMBER 31, 2021
INDEX TO FORM 10-K
PART I
Item 1.
Business .........................................................................................................................................................
Item 1A. Risk Factors ...................................................................................................................................................
Item 1B. Unresolved Staff Comments .........................................................................................................................
Item 2.
Item 3.
Properties .......................................................................................................................................................
Legal Proceedings .........................................................................................................................................
Item 4. Mine Safety Disclosures ................................................................................................................................
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities .......................................................................................................................................................
Item 6.
Reserved ........................................................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .......................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ......................................................................
Item 8.
Item 9.
Financial Statements and Supplementary Data .............................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .......................
Item 9A. Controls and Procedures ................................................................................................................................
Item 9B. Other Information ..........................................................................................................................................
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance ............................................................................
Item 11. Executive Compensation ...............................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .....
Item 13. Certain Relationships and Related Transactions, and Director Independence ..............................................
Item 14. Principal Accounting Fees and Services .......................................................................................................
PART IV
Item 15. Financial Statement Schedules and Exhibits .................................................................................................
Item 16. Form 10-K Summary ....................................................................................................................................
SIGNATURES
Page
4
50
79
79
81
82
82
85
85
108
109
159
159
161
162
162
162
162
162
162
162
168
As used in this Annual Report on Form 10-K, unless the context otherwise indicates, the references to “we,” “us,” “our,”
the “Company” or “Braemar” refer to Braemar Hotels & Resorts Inc., a Maryland corporation, and, as the context may
require, its consolidated subsidiaries, including Braemar Hospitality Limited Partnership, a Delaware limited partnership,
which we refer to as “our operating partnership” or “Braemar OP.” “Our TRSs” refers to our taxable REIT subsidiaries,
including Braemar TRS Corporation, a Delaware corporation, which we refer to as “Braemar TRS,” and its subsidiaries,
together with the two taxable REIT subsidiaries that lease our two hotels held in a consolidated joint venture and are wholly-
owned by the joint venture and the U.S. Virgin Islands’ (“USVI”) taxable REIT subsidiary that owns The Ritz-Carlton St.
Thomas hotel. “Ashford Trust” or “AHT” refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context
may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership
and Ashford Trust’s operating partnership, which we refer to as “Ashford Trust OP.” “Ashford Inc.” refers to Ashford Inc., a
Nevada corporation and, as the context may require, its consolidated subsidiaries. “Ashford LLC” or “our advisor” refers to
Ashford Hospitality Advisors LLC, a Delaware limited liability company and a subsidiary of Ashford Inc. “Premier” refers to
Premier Project Management LLC, a Maryland limited liability company and a subsidiary of Ashford LLC. “Remington
Lodging” refers to Remington Lodging & Hospitality, LLC, a Delaware limited liability company and a hotel management
company that was owned by Mr. Monty J. Bennett, chairman of our board of directors, and his father, Mr. Archie Bennett, Jr.,
chairman emeritus of Ashford Trust before its acquisition by Ashford Inc. on November 6, 2019. “Remington Hotels” refers to
the same entity after the acquisition was completed, resulting in Remington Lodging & Hospitality, LLC becoming a subsidiary
of Ashford Inc.
This Annual Report on Form 10-K 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 Annual Report on Form 10-K and documents incorporated herein by reference, 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:
•
•
•
•
•
•
•
•
•
the factors discussed in this Annual Report under the sections entitled “Risk Factors,” “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties,” as updated in our
subsequent Quarterly Reports on Form 10-Q and other filings under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”);
the impact of the ongoing COVID-19 pandemic, including the resurgence of cases relating to the spread of the Delta,
Omicron or other potential variants, on our business, financial condition, liquidity and results of operations;
the impact of numerous governmental travel restrictions and other orders related to COVID-19 on our business
including one or more possible recurrences of COVID-19 case surges causing state and local governments to reinstate
travel restrictions;
our business and investment strategy;
anticipated or expected purchases or sales of assets;
our projected operating results;
completion of any pending transactions;
our ability to secure additional financing to enable us to operate our business during the pendency of COVID-related
business weakness, which has materially impacted our operating cash flows and cash balances;
our understanding of our competition;
• market trends;
•
•
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:
2
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the factors discussed in this Annual Report under the sections entitled “Risk Factors,” “Legal Proceedings,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and
“Properties,” as updated in our subsequent Quarterly Reports on Form 10-Q and other filings under the Exchange Act;
adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and travel
restrictions in regions where our hotels are located, and one or more possible recurrences of COVID-19 case surges
causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or
local governments;
extreme weather conditions 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;
actions by our lenders to accelerate loan balances and foreclose on the hotel properties that are security for our loans if
we are unable to make debt service payments or satisfy our other obligations under the forbearance agreements;
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;
unanticipated increases in financing and other costs, including a rise 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 Hotels and Premier) and our executive officers and our non-independent director;
changes in personnel of Ashford LLC or the lack of availability of qualified personnel;
changes in governmental regulations, accounting rules, tax rates and similar matters;
legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”)
and related rules, regulations and interpretations governing the taxation of REITs;
limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for
U.S. federal income tax purposes; and
future sales and issuances of our common stock or other securities 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 risk factors and other cautionary statements in
this Annual Report on Form 10-K. The matters summarized under “Item 1A. Risk Factors,” and elsewhere, 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 Annual Report on Form 10-K. Furthermore, we do not intend
to update any of our forward-looking statements after the date of this Annual Report on Form 10-K to conform these statements
to actual results and performance, except as may be required by applicable law.
3
Item 1. Business
Changes from Prior Periodic Report
PART I
In this report we have complied with the disclosures required by the Securities and Exchange Commission (“SEC”) release
No. 33-10825 “Modernization of Regulation S-K Items 101, 103, and 105”, and we have adopted the changes in disclosure
standards included in SEC release No. 33-10890 “Management's Discussion and Analysis, Selected Financial Data,
Supplementary Financial Information.”
Modernization of Regulation S-K Items 101, 103 and 105
Effective as of November 9, 2020, the SEC issued Release No. 33-10825, “Modernization of Regulation S-K Items 101,
103, and 105.” This release was adopted to modernize the description of business, legal proceedings, and risk factor disclosures
that registrants are required to make pursuant to Regulation S-K. Specifically, this release requires registrants to provide
disclosures relating to their human capital resources and to restructure their risk factor disclosures. Additionally, the release
increases the threshold for disclosure of environmental proceedings to which the government is a party.
These changes are required for any annual period subsequent to the effective date of November 9, 2020. As such, we have
adopted these changes in this report.
Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information
In November 2020, the SEC issued Release No. 33-10890, “Management’s Discussion and Analysis, Selected Financial
Data, and Supplementary Financial Information,” which become fully effective on August 9, 2021. This release was adopted to
modernize, simplify, and enhance certain financial disclosure requirements in Regulation S-K. Specifically, the SEC eliminated
the requirement for selected financial data, only requiring quarterly disclosure when there are retrospective changes affecting
comprehensive income, and amending the matters required to be presented under Management’s Discussion and Analysis
(“MD&A”) to, among other things, eliminate the requirement of the contractual obligations table.
We have eliminated from this document the items discussed above that are no longer required. Information on our
contractual obligations is still disclosed in a narrative within the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Item 7 of Part II of this report.
Our Company
We are an externally-advised Maryland corporation formed in 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 Smith Travel Research. Two times the
U.S. national average RevPAR was approximately $144 for the year ended December 31, 2021. We have elected to be taxed as
a REIT under the Code beginning in the year ended December 31, 2013. We conduct our business and own substantially all of
our assets through our operating partnership, Braemar OP.
We operate in the direct hotel investment segment of the hotel lodging industry. As of March 8, 2022, we owned interests
in 14 hotel properties in six states, the District of Columbia and St. Thomas, U.S. Virgin Islands with 3,875 total rooms, or
3,640 net rooms, excluding those attributable to our joint venture partner. The hotel properties in our current portfolio are
predominantly located in U.S. urban and resort locations with favorable growth characteristics resulting from multiple demand
generators. We own 12 of our hotel properties directly, and the remaining two hotel properties through an investment in a
majority-owned consolidated joint venture entity.
We are advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement. All of the hotel properties
in our portfolio are currently asset-managed by Ashford LLC. Asset management functions include acquisition, renovation,
financing and disposition of assets, operational accountability of managers, budget review, capital expenditures and property-
level strategies as compared to the day-to-day management of our hotel properties, which is performed by our hotel managers.
We do not have any employees. All of the advisory 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 employ hotel management companies to operate them
for us under management contracts. On November 6, 2019, Ashford Inc. completed its acquisition of Remington Lodging’s
hotel management business from Mr. Monty J. Bennett, chairman of our board of directors, and Mr. Archie Bennett, Jr.,
4
chairman emeritus of Ashford Trust. Remington Hotels, a subsidiary of Ashford Inc. after November 6, 2019, manages four of
our 14 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, audio visual services, real estate advisory services, insurance claims services,
hypoallergenic premium rooms, watersport activities, travel/transportation services, mobile key technology and broker-dealer
services. See note 15 to our consolidated financial statements.
As of December 31, 2021, Mr. Monty J. Bennett and Mr. Archie Bennett, Jr., together owned approximately 610,246
shares of Ashford Inc. common stock, which represented an approximate 20.2% ownership interest in Ashford Inc., and owned
18,758,600 shares of Ashford Inc. Series D Convertible Preferred Stock, which was exercisable (at an exercise price of $117.50
per share) into an additional approximate 3,991,191 shares of Ashford Inc. common stock, which if exercised as of December
31, 2021 would have increased the Bennetts’ ownership interest in Ashford Inc. to approximately 65.6%, subject to applicable
voting limitations. The 18,758,600 shares of Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr.
Archie Bennett, Jr. include 360,000 shares owned by trusts.
As of December 31, 2021, Mr. Monty J. Bennett, chairman of our board of directors and his father, Mr. Archie Bennett, Jr.,
together owned approximately 4,112,277 common shares of the Company (including common units, long-term incentive plan
(“LTIP”) units and performance LTIP units), which represented an approximate 5.7% ownership in the Company.
We continued to see a negative impact on room demand within our portfolio stemming from the COVID-19 pandemic
during 2021. A more detailed discussion of the ongoing impact of the COVID-19 pandemic on our business is contained in
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our Investment and Growth Strategies
Our principal business objectives are to generate attractive returns on our invested capital and long-term growth in cash
flow to maximize total returns to our stockholders. To achieve our objectives, we pursue the following strategies:
Focused Investment Strategy. Our strategy is to invest in premium-branded and high-quality independent luxury hotels
and resorts that are anticipated to generate RevPAR at least twice the average RevPAR for the U.S. lodging industry, as
determined by Smith Travel Research and are located predominantly in North America.
We intend to concentrate our investments in markets where we believe there are significant growth opportunities, taking
into consideration the risk of additional supply. In determining anticipated RevPAR for a particular asset, we may take into
account forecasts and other considerations, including without limitation, conversions or repositioning of assets, capital plans,
brand changes and other factors which may reasonably be forecasted to raise RevPAR after stabilization. Stabilization with
respect to a hotel, after the completion of an initiative such as a capital plan, conversion or change of brand name or change of
the business mix or other operating characteristics, is generally expected to occur within 12 to 24 months after the completion
of the related renovation, repositioning or brand change.
In connection with this investment strategy, we frequently evaluate opportunities to acquire additional hotel properties,
either through direct ownership, joint ventures, partnership participations or similar arrangements. We may use cash or debt or
issue common units or other securities of ours or our operating partnership, Braemar OP, or our other subsidiaries as currency
for a transaction. Some or all of these acquisitions, if completed, may be material to our company, individually or in the
aggregate. We may, from time to time, be party to letters of intent, term sheets and other non-binding agreements relating to
potential acquisitions. We cannot assure you that we will enter into definitive acquisition agreements with respect to any
potential acquisitions.
Active Asset Management Strategy. We rely on Ashford LLC to asset-manage the hotel properties in our portfolio, and
will rely on Ashford LLC to asset-manage any hotel properties we may acquire in the future, to help maximize the operating
performance, cash flow and value of each hotel. Asset management is intended to include actively “managing” the hotel
managers and holding them accountable to drive top line and bottom-line operating performances. Ashford LLC aims to
achieve this goal by benchmarking each asset’s performance compared to similar hotel properties within our portfolio. Ashford
LLC also closely monitors all hotel operating expenses, as well as third-party vendor and service contracts. If expense levels are
not commensurate with the property revenues, Ashford LLC works with the property manager to implement cost-cutting
initiatives. Ashford LLC is also very active in evaluating and proposing improved strategies for the sales, marketing and
revenue management initiatives of the property manager as well as its ability to drive ancillary hotel revenues (e.g., spa, food
and beverage, parking, and Internet). In addition to supervising and directing the property manager, Ashford LLC works with
the brands and management companies to negotiate favorable franchise agreement and hotel management agreement terms.
5
Ashford LLC also actively participates in brand advisory committee meetings to provide feedback and input on new hotel brand
initiatives.
Disciplined Capital Allocation Strategy. We intend to pursue a disciplined capital allocation strategy for the acquisition,
operation, disposition and financing of assets in our portfolio and those that we may acquire in the future. Ashford LLC utilizes
its extensive industry experience and capital markets expertise to influence the timing of capital deployment and recycling, and
we may selectively sell hotel properties that are no longer consistent with our investment strategy or as to which returns appear
to have been maximized. To the extent we sell hotel properties, we generally intend to redeploy the capital into investment
opportunities that we believe will achieve higher returns or buy back our common stock or other securities.
Our Hotels
As of March 8, 2022, we own interests in a high-quality, geographically diverse portfolio of 14 hotel properties located in
six states, the District of Columbia and St. Thomas, U.S. Virgin Islands. Our properties have 3,875 total rooms, or 3,640 net
rooms, excluding those attributable to our joint venture partner. All of the hotel properties in our portfolio are generally located
in markets that exhibit strong growth characteristics resulting from multiple demand generators. Eight of the 14 hotel properties
in our portfolio operate under premium brands affiliated with Marriott International, Inc. (“Marriott”) and Hilton Worldwide,
Inc. (“Hilton”). One hotel property is managed by Accor Management US Inc. (“Accor”), one is managed by Hyatt Corporation
(“Hyatt”) and four hotel properties are managed by Remington Hotels, a subsidiary of Ashford Inc. The material terms of these
hotel management agreements are described below in “Certain Agreements—Hotel Management Agreements.” Each of our
hotel properties is encumbered by loans as described in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Indebtedness.” For the year ended December 31, 2021, approximately 88% of the rooms revenue was
generated by transient business, approximately 11% was generated by group sales and 1% was generated by contract sales.
The following table sets forth additional information for our hotel properties (dollars in thousands, except ADR and
RevPAR) for the year ended December 31, 2021:
Year Ended December 31, 2021
Total
Rooms
%
Owned
Occupancy
ADR
RevPAR
Hotel Property
Hilton La Jolla Torrey Pines(2)
Capital Hilton ...................................................... Washington, D.C.
............................. La Jolla, CA
Location
Marriott Seattle Waterfront ................................. Seattle, WA
The Clancy ........................................................... San Francisco, CA
The Notary Hotel ................................................. Philadelphia, PA
The Ritz-Carlton Lake Tahoe (3)
The Ritz-Carlton Sarasota ................................... Sarasota, FL
.......................... Truckee, CA
Sofitel Chicago Magnificent Mile ....................... Chicago, IL
Pier House Resort & Spa ..................................... Key West, FL
Bardessono Hotel and Spa (4)
The Ritz-Carlton St. Thomas ............................... St. Thomas, U.S. Virgin Islands
............................... Yountville, CA
Park Hyatt Beaver Creek Resort & Spa ............... Beaver Creek, CO
Hotel Yountville .................................................. Yountville, CA
Mr. C Beverly Hills Hotel (5)
Total / Weighted Average (6)
............................... Los Angeles, CA
............................
394
550
361
410
499
170
276
415
142
65
180
190
80
143
75 %
75 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
Hotel
EBITDA (1)
6,235
57.80 % $ 203.63 $ 117.70 $
30.47 % 159.77
48.68
52.22 % 219.51
114.64
55.97 % 174.64
36.94 % 176.70
97.74
65.27
55.00 % 642.81
353.56
76.99 % 545.68
420.14
46.93 % 202.88
95.21
81.83 % 591.40
483.93
67.92 % 1,141.39
775.18
79.52 % 1,049.29
834.39
54.94 % 454.17
249.50
57.90 % 762.15
63.88 % 332.86
441.29
212.62
(3,342)
3,557
(2,217)
1,924
7,835
25,663
(3,560)
18,039
9,208
27,550
9,609
6,433
1,052
3,875
52.44 % $ 384.95 $ 201.86 $ 107,986
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of
Hotel EBITDA by property. We own the Hilton La Jolla Torrey Pines and the Capital Hilton in a joint venture. The Hotel EBITDA represents the total
amount for each hotel during our period of ownership, not our pro rata amount based on our ownership percentage.
(2) Subject to a ground lease that expires in 2067. The ground lease contains one extension option of either 10 or 20 years dependent upon capital investment
spend during the lease term.
(3) The above information, excluding Hotel EBITDA, does not include the operations of ten condominium units not owned by The Ritz-Carlton Lake Tahoe.
(4) Subject to a ground lease that initially expires in 2065. The ground lease contains two 25-year extension options, at our election.
(5) The results of Mr. C Beverly Hills Hotel and the five adjacent luxury residences are included from August 5, 2021 through December 31, 2021.
(6) Calculated on a portfolio basis for the 14 hotel properties in our portfolio as of December 31, 2021.
Hilton La Jolla Torrey Pines, La Jolla, California
We own a 75% partnership interest in Ashford HHC Partners III LP, which is subject to a ground lease in the Hilton La
Jolla Torrey Pines expiring in 2067. CHH Torrey Pines Hotel Partners LP, a subsidiary of Ashford HHC Partners III LP, leases
the Hilton La Jolla Torrey Pines hotel to CHH Torrey Pines Tenant Corp. The remaining 25% partnership interest in Ashford
6
HHC Partners III LP is owned by Park Hotels & Resorts, Inc. The hotel opened in 1989 and is comprised of 394 guest rooms,
including 232 king rooms, 152 queen/queen rooms and 10 suites. Approximately $30.7 million has been spent on capital
expenditures since the acquisition of the hotel by Ashford HHC Partners III LP in 2007, which included lobby, restaurant,
meeting space and room renovations.
The hotel’s location attracts all three major demand segments: corporate transient, group meetings and leisure transient.
The famous Torrey Pines Golf Course, located on the property’s western boundary, appeals to each demand segment and
provides exclusive tee times to guests staying at the hotel. Nearly every room has a private balcony or patio with ocean, garden
or golf course views. In addition to the attraction of the golf course, the hotel is located within walking distance of the Torrey
Pines State Nature Reserve with access to a number of outdoor activities and Pacific Ocean beaches. Numerous hospitals and
research facilities are located within close proximity of the hotel.
Additional property highlights include:
• Meeting Space: Approximately 60,000 square feet of event space, including:
•
•
•
21,000 square feet of function space in 21 rooms to accommodate up to 1,500 people;
over 32,000 square feet of outdoor function space; and
the 6,203 square foot Fairway Pavilion Ballroom overlooking the 18th fairway of Torrey Pines Golf Course South
Course.
• Food and Beverage: The Hilton La Jolla Torrey Pines hosts the Torreyana Grill and Lounge, an all-purpose, three-
meal restaurant with 205 seats and the Horizons Lounge. Both outlets overlook the golf course and the Pacific Ocean.
• Other Amenities: The hotel has a fitness center, outdoor pool, outdoor whirlpool, tennis courts, basketball court,
business center, lush gardens and pathways, valet parking and a gift shop.
Location and Access. The hotel is located near the Pacific Ocean in a secluded area of the famous Torrey Pines Golf
Course. The hotel is approximately 17 miles from the San Diego International Airport.
Operating History. The following table shows certain historical information regarding the Hilton La Jolla Torrey Pines
since 2017:
Rooms .....................................................................................................
Occupancy ...............................................................................................
ADR ........................................................................................................ $ 203.63
RevPAR ................................................................................................... $ 117.70
394
57.8 %
2021
Year Ended December 31,
2019
2018
2020
394
37.8 %
394
83.1 %
394
85.3 %
2017
394
83.7 %
$ 175.17
$ 66.29
$ 216.18
$ 179.56
$ 214.34
$ 182.91
$ 205.19
$ 171.64
Selected Financial Information. The following tables show certain selected financial information regarding the Hilton La
Jolla Torrey Pines since 2019 (dollars in thousands):
Total Revenue ...................................................................................................................................... $ 25,816
Rooms Revenue ...................................................................................................................................
16,927
Hotel EBITDA(1)
..................................................................................................................................
6,235
Hotel EBITDA Margin (1)
....................................................................................................................
2021
Year Ended December 31,
2020
$ 15,389
9,559
353
2.3 %
2019
$ 46,973
25,822
15,695
24.2 %
33.4 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property. We own the Hilton La Jolla Torrey Pines in a joint venture. The Hotel
EBITDA amount for this hotel represents the total amount for this hotel, not our pro rata amount based on our 75% ownership
percentage.
7
Capital Hilton, Washington, D.C.
We own a 75% partnership interest in Ashford HHC Partners III LP, which has a fee simple interest in the Capital Hilton.
CHH Capital Hotel Partners LP, a subsidiary of Ashford HHC Partners III LP, leases the Capital Hilton to CHH Capital Tenant
Corp. The remaining 25% partnership interest in Ashford HHC Partners III LP is owned by Park Hotels & Resorts, Inc. The
hotel opened in 1943 and is comprised of 550 guest rooms, including 283 king rooms, 94 queen/queen rooms, 90 double/double
rooms, 81 single queen rooms and two parlor suites. Approximately $65.6 million has been spent on capital expenditures since
the acquisition of the hotel by Ashford HHC Partners III LP in 2007, which included renovations to the guest rooms, public
space, meeting space, lobby and restaurant.
The hotel is strategically located at 16th and K Street, in close proximity to the White House and other government
facilities. The hotel has significant historical connotations and is located near numerous Washington, D.C. attractions including
the National Mall. The offices of a number of legal firms and national associations are located within walking distance of the
property.
Additional property highlights include:
• Meeting Space: Approximately 31,000 square feet of contiguous meeting space located on the same floor.
• Food and Beverage: The Capital Hilton hosts (i) the Northgate Grill, a full service restaurant with 130 seats and (ii) the
Statler Lounge, a lobby bar with 72 seats.
• Other Amenities: The hotel has a health club as well as a gift shop, business center and valet parking.
Location and Access. The hotel is conveniently located in the center of Washington, D.C., north of the White House and
near the National Mall and numerous tourist attractions. By virtue of its size and clear signage, it is visible from both directions
on 16th street. The hotel is approximately five miles from Ronald Reagan Washington National Airport.
Operating History. The following table shows certain historical information regarding the Capital Hilton since 2017:
Rooms ....................................................................................................
Occupancy ..............................................................................................
ADR ....................................................................................................... $ 159.77
RevPAR ................................................................................................. $ 48.68
550
30.5 %
2021
Year Ended December 31,
2019
2018
2020
550
19.2 %
550
83.0 %
550
83.5 %
2017
550
88.6 %
$ 197.00
$ 37.73
$ 232.62
$ 192.95
$ 233.73
$ 195.22
$ 237.87
$ 210.83
Selected Financial Information. The following tables show certain selected financial information regarding the Capital
Hilton since 2019 (dollars in thousands):
Total Revenue ...................................................................................................................................... $ 13,929
Rooms Revenue ...................................................................................................................................
9,773
Hotel EBITDA(1)
..................................................................................................................................
(3,342)
Hotel EBITDA Margin (1)
....................................................................................................................
(24.0) %
2021
Year Ended December 31,
2020
$ 12,718
7,595
(5,076)
2019
$ 57,285
38,735
14,141
(39.9) %
24.7 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property. We own the Capital Hilton in a joint venture. The Hotel EBITDA
amount for this hotel represents the total amount for this hotel, not our pro rata amount based on our 75% ownership percentage.
Marriott Seattle Waterfront, Seattle, Washington
Our subsidiary, Ashford Seattle Waterfront LP, owns a fee simple interest in the Marriott Seattle Waterfront. The hotel
opened in 2003 and is comprised of 348 guest rooms and 13 suites, including 204 king rooms, 155 double/double rooms and
two Murphy beds. About half of the hotel’s guest rooms have water views overlooking Elliott Bay with the remaining guest
rooms having partial water views. Approximately $21.7 million has been spent on capital expenditures since the acquisition of
the hotel in 2007. Capital improvements for 2017 included the relocation of the M Club from the eighth floor to the lobby level,
which recaptured three guest rooms. A model room was recently completed in anticipation of a rooms renovation which is
expected to occur in 2022.
8
The hotel is located on the Seattle Waterfront within walking distance of Pike Place Market, a unique retail experience and
a major Seattle tourist attraction. Numerous food vendors providing locally produced food, retail shops offering a variety of
merchandise and the original Starbucks Coffee Shop complement the venue. The Seattle Great Wheel, one of the tallest Ferris
wheels in the western United States, and the Seattle Aquarium are located along Alaskan Way in close proximity to the hotel.
The hotel is also located directly across from the Pier 66 cruise terminal, a strong leisure demand generator during the six-
month long cruise season.
Additional property highlights include:
• Meeting Space: Approximately 18,000 square feet of meeting space.
• Food and Beverage: The Marriott Seattle Waterfront hosts: (i) Hook and Plow, a full-service restaurant with 192 seats;
(ii) Lobby Bar/Library with 120 seats; and (iii) the “Market” offering snacks, drinks and sundry items.
• Other Amenities: The hotel has a fitness center, indoor/outdoor connected pool, business center, guest laundry
facilities, valet parking and three electric vehicle charging stations.
Location and Access. The hotel is conveniently located on the Seattle waterfront, just off of the Alaskan Way S. exit from
Highway 99 N. The hotel is approximately 13 miles from the Seattle/Tacoma International Airport.
Operating History. The following table shows certain historical information regarding the Marriott Seattle Waterfront since
2017:
Rooms ....................................................................................................
Occupancy ..............................................................................................
ADR ....................................................................................................... $ 219.51
RevPAR ................................................................................................. $ 114.64
361
52.2 %
2021
Year Ended December 31,
2019
2018
2020
361
20.7 %
361
83.2 %
361
84.8 %
2017
361
88.0 %
$ 205.12
$ 42.41
$ 266.62
$ 221.87
$ 283.59
$ 240.49
$ 272.19
$ 239.50
Selected Financial Information. The following tables show certain selected financial information regarding the Marriott
Seattle Waterfront since 2019 (dollars in thousands):
Total Revenue ...................................................................................................................................... $ 18,315
Rooms Revenue ...................................................................................................................................
15,105
Hotel EBITDA (1)
.................................................................................................................................
3,557
Hotel EBITDA Margin (1)
.........................................................................................................
19.4 %
2021
Year Ended December 31,
2020
$ 7,021
5,604
(1,733)
2019
$ 37,497
29,235
14,250
(24.7) %
38.0 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
The Clancy, San Francisco, California
Our subsidiary, Ashford San Francisco II LP, owns a fee simple interest in The Clancy. The hotel opened in 2001 and is
comprised of 410 guest rooms, including 196 king rooms, 184 queen/queen rooms and 30 suites. Approximately $74.2 million
has been spent on capital expenditures since the acquisition of the hotel in 2007, which included a restaurant renovation, a guest
room soft goods renovation and a meeting space renovation. In early 2017, the hotel began an extensive custom designed guest
room renovation. As part of this renovation we increased the room count from 405 to 410 rooms utilizing former conference
suites. The new guest rooms reflect the hotel’s ideal location in the new and evolving SoMa district. Bold vibrant colors with
calming grey undertones mimic the stunning visual beauty expressed in the iconic city of San Francisco. Innovative smart
technology combined with comfort and luxury provide travelers with an intriguing and unique experience.
On October 1, 2020, we announced the opening of the Clancy, a conversion of the Courtyard San Francisco Downtown
into a full service hotel within Marriott’s Autograph Collection®. The conversion included a complete redesign of the lobby,
front desk, food and beverage outlets, meeting spaces, public areas and the façade. The custom designed guest rooms are
commensurate with an upper upscale brand. Adding a few additional amenities and accessories completed their transition to an
Autograph Collection Hotel. The reimaged public space and modern guest rooms elevate The Clancy within the upper upscale
market.
9
The hotel is located conveniently downtown in the heart of the SoMa district of San Francisco. The hotel is located near
numerous high tech businesses and attractions, including the Moscone Convention Center, Transbay Transit Center, Oracle
Park, Union Square and the Metreon Complex.
Additional property highlights include:
• Meeting Space: Approximately 8,700 square feet of indoor meeting space and nearly 1,000 square feet of private
outdoor reception areas. In 2022, we plan to convert the former indoor swimming pool space into an approximate
1,200 square foot meeting room which will include an outdoor balcony space overlooking the Block 9 Courtyard.
Located on the second floor adjacent to the majority of the hotel’s meeting space, this new meeting room will allow
the hotel to capture additional groups while providing much greater flexibility to the group meeting guests.
• Food and Beverage: The transformed food and beverage outlets at The Clancy include completely reconfigured spaces
to meet the requirements of today’s discerning traveler. The Seven Square Tap Room, open for breakfast, lunch, dinner
and cocktails, seats 118. The dining area seats 78. The bar and lounge area seats six at the bar and 34 in the lounge.
The Lobby Lounge is configured with a bar, couches, small tables and a community table, seats 43 guests including 10
at the bar, 10 at the community table and 23 in various other seating configurations. The Radiator Coffee Salon, open
for breakfast and light lunches seats 35 patrons at tables and stadium style seating. An exterior sales window allows
the outlet to capture business from local residents and office commuters. Two exterior venues are available for both
group and transient guests: the original outdoor courtyard, renamed Block 9 and a completely new space, the Parklet.
Block 9 includes a fire pit and has been redesigned to be flexible enough to offer overflow seating for the Lobby
Lounge and for private receptions. Total seating in Block 9 encompasses 56 seats in lounge, table and stadium seating
configurations. The Parklet is completely covered and can be used for small receptions and outdoor seating.
• Other Amenities: The hotel has a fully equipped fitness center. In 2022 we plan to expand the fitness center by
approximately 600 square feet. Once completed it will comprise approximately 1,400 square feet. SOMA Mercantile, a
gift shop of approximately 100 square feet contains food, beverage and retail items unique to San Francisco, along
with national brand favorites. Valet parking is available in a two level subterranean garage.
Original Art: During the conversion process, we commissioned two new outdoor murals, located in Block 9 and the
Parklet and two sculptures, one located on a lobby wall and one on the exterior of the building. The hotel’s original art
piece, a globe representing San Francisco’s unique position as a world class city, was moved from Block 9 to a
prominent position in the Parklet.
•
Location and Access. The hotel is located in downtown San Francisco and is easily accessible from Interstate 80 and US
101. The hotel is approximately 14 miles from the San Francisco International Airport. The Montgomery Street BART (Bay
Area Rapid Transit) station is approximately three blocks from the hotel providing convenient access to the airport and East
Bay communities.
Operating History. The following table shows certain historical information regarding The Clancy since 2017:
Rooms ....................................................................................................
Occupancy ..............................................................................................
ADR ....................................................................................................... $ 174.64
RevPAR ................................................................................................. $ 97.74
410
56.0 %
2021
Year Ended December 31,
2019
2018
2020
410
19.5 %
410
90.0 %
410
86.7 %
2017
408
79.9 %
$ 281.66
$ 54.97
$ 301.30
$ 271.14
$ 285.70
$ 247.58
$ 270.38
$ 216.12
Selected Financial Information. The following tables show certain selected financial information regarding The Clancy
since 2019 (dollars in thousands):
Total Revenue ...................................................................................................................................... $ 17,380
Rooms Revenue ...................................................................................................................................
14,627
Hotel EBITDA (1)
.................................................................................................................................
(2,217)
Hotel EBITDA Margin (1)
....................................................................................................................
(12.8) %
2021
Year Ended December 31,
2020
$ 9,622
8,249
(3,695)
2019
$ 44,167
40,576
14,248
(38.4) %
32.3 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
10
The Notary Hotel, Philadelphia, Pennsylvania
Our subsidiary, Ashford Philadelphia Annex LP, owns a fee simple interest in The Notary Hotel. The hotel opened in 1999
and is comprised of 499 guest rooms, including 311 king rooms, 109 queen/queen rooms, 77 double/double rooms and two
parlor suites. Approximately $57.8 million has been spent on capital expenditures since the acquisition of the hotel in 2007.
On July 17, 2019, we announced the opening of The Notary Hotel. Listed on the National Register of Historic Places, the
former Courtyard by Marriott Philadelphia Downtown underwent a rebranding and renovation in excess of $20 million to create
The Notary Hotel. Improvements included a complete renovation of the guest rooms, guest corridors, and lobby. Additionally
the restaurant was renovated and repositioned as an upscale tapas bar.
The property joined Marriott’s Autograph Collection® Hotels, a diverse portfolio of independent hotels around the world
that reflect unique vision, design and environments. It is located in the center of Philadelphia’s downtown business district,
across from City Hall and one block from the Philadelphia Convention Center. The hotel is also conveniently located next to
the Historical District, the Reading Terminal Market, the University of Pennsylvania and Independence Hall.
Additional property highlights include:
• Meeting Space: Approximately 10,000 square feet of meeting space throughout 12 event rooms.
• Food and Beverage: The Notary Hotel hosts (i) Sabroso+Sorbo, an exciting restaurant with Latin-inspired fare and
specialty cocktails and (ii) La Colombe®, the hotel’s popular onsite coffee outlet featuring grab-and-go sandwiches,
appetizing snacks, fresh salads and delectable pastries.
• Other Amenities: The hotel has a fitness center, sundries shop/market, business center and valet parking.
Location and Access. The hotel is located in downtown Philadelphia and is accessible from Interstate 676. The hotel’s
corner location and clear signage make it easily visible from both Juniper Street and South Penn Square. The hotel is
approximately 10 miles from the Philadelphia International Airport.
Operating History. The following table shows certain historical information regarding The Notary Hotel since 2017:
Rooms ....................................................................................................
Occupancy ..............................................................................................
ADR ....................................................................................................... $ 176.70
RevPAR ................................................................................................. $ 65.27
499
36.9 %
2021
Year Ended December 31,
2019
2018
2020
499
24.2 %
499
72.2 %
499
82.9 %
2017
499
81.8 %
$ 166.25
$ 40.24
$ 197.97
$ 142.84
$ 186.10
$ 154.32
$ 176.71
$ 144.60
Selected Financial Information. The following tables show certain selected financial information regarding The Notary
Hotel since 2019 (dollars in thousands):
Total Revenue ...................................................................................................................................... $ 14,158
Rooms Revenue ...................................................................................................................................
11,889
Hotel EBITDA(1)
..................................................................................................................................
1,924
Hotel EBITDA Margin (1)
....................................................................................................................
2021
Year Ended December 31,
2020
$ 9,000
7,349
(1,633)
2019
$ 31,887
26,016
9,850
13.6 %
(18.1) %
30.9 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
Sofitel Chicago Magnificent Mile, Chicago, Illinois
On February 24, 2014, we acquired a fee simple interest in the Sofitel Chicago Magnificent Mile. The hotel opened in 2002
and is comprised of 415 guest rooms, including 63 suites. Approximately $18.4 million has been spent on capital expenditures
at the hotel since the acquisition of the hotel in 2014. The fitness center and lobby bar were extensively renovated in the first
quarter of 2017. A comprehensive guest room and corridor renovation began in the fourth quarter of 2017 and was completed in
the second quarter of 2018.
The hotel is located one block west of Chicago’s Magnificent Mile on a 0.6 acre parcel in an area of Chicago known as the
Gold Coast. The 32-story building was designed by French architect Jean-Paul Viguier and has views of Lake Michigan and the
11
Chicago skyline. It is located in the heart of the Gold Coast neighborhood, proximate to some of Chicago’s largest leisure
demand generators, on the corner of Chestnut Street and Wabash Avenue.
Additional property highlights include:
• Meeting Space: Approximately 10,000 square feet of meeting space.
•
•
Food and Beverage: The Sofitel Chicago Magnificent Mile includes (i) CDA, an 82 seat French inspired casual
restaurant; (ii) Le Bar, a 45 seat modern cocktail lounge; (iii) La Tarrasse, a 40-seat outdoor patio and lounge serving
the cuisine of CDA; and (iv) Cigale, a restaurant space featuring an exhibition kitchen and frontage on Wabash
Avenue overlooking Connors Park (currently utilized only for event space).
Other Amenities: The hotel has a fitness center, a business center and valet parking.
Location and Access. The hotel is located one block west of Chicago’s Magnificent Mile on a 0.6 acre parcel in an area of
Chicago known as the Gold Coast. The hotel has easy access to the Chicago “L” train and is located approximately 18 miles
from O’Hare International Airport and 13 miles from Midway International Airport.
Operating History. The following table shows certain historical information regarding the Sofitel Chicago Magnificent
Mile since 2017:
Rooms ....................................................................................................
Occupancy ..............................................................................................
ADR ....................................................................................................... $ 202.88
RevPAR ................................................................................................. $ 95.21
415
46.9 %
2021
Year Ended December 31,
2019
2018
2020
415
27.9 %
415
82.4 %
415
79.2 %
2017
415
80.9 %
$ 141.25
$ 39.36
$ 203.34
$ 167.46
$ 216.11
$ 171.04
$ 202.66
$ 164.00
Selected Financial Information. The following table shows certain selected financial information regarding the Sofitel
Chicago Magnificent Mile since 2019 (dollars in thousands):
Total Revenue ..................................................................................................................................... $ 18,993
Rooms Revenue ...................................................................................................................................
14,422
Hotel EBITDA(1)
.................................................................................................................................
(3,560)
Hotel EBITDA Margin(1)
.....................................................................................................................
(18.7) %
2021
Year Ended December 31,
2020
$ 7,882
5,979
(5,388)
2019
$ 34,770
25,366
7,169
(68.4) %
20.6 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
Pier House Resort & Spa, Key West, Florida
On March 1, 2014, we acquired a fee simple interest in the Pier House Resort & Spa from Ashford Trust pursuant to an
option agreement that we entered into in connection with our spin-off from Ashford Trust. The hotel opened in 1968 and is
comprised of 142 guest rooms, including 76 king rooms, 43 queen/queen rooms and 23 suites. Approximately $16.0 million has
been spent on capital expenditures since the acquisition of the hotel in May 2013, which included spa, fitness center and guest
rooms refresh renovations.
The hotel is located on a six-acre parcel in Key West, Florida. In addition to its secluded private beach, the hotel is well-
situated at the north end of Duval Street providing easy access to the heart of Key West and its many demand generators.
Additional property highlights include:
• Meeting Space: Approximately 2,600 square feet of conference space and 2,000 square feet of wedding space
overlooking the Gulf of Mexico.
• Food and Beverage: The Pier House Resort & Spa provides an al fresco beach bar, the 152-seat One Duval Restaurant
as well as the 18-seat Chart Room.
• Other Amenities: The hotel has a full-service spa, a private beach, a heated outdoor pool and a private dock for charter
pick-ups.
12
Location and Access. The hotel is located on a six-acre compound in the historic district of Key West, Florida, on Duval
Street, at the Gulf of Mexico. Key West, which is the southernmost point of the Florida peninsula, is 160 miles south of Miami.
Key West International Airport is approximately four miles from the property and the Marathon and Miami airports are all
within driving distance.
Operating History. The following table shows certain historical information regarding the Pier House Resort & Spa since
2017:
Rooms ....................................................................................................
Occupancy ..............................................................................................
ADR ....................................................................................................... $ 591.40
RevPAR ................................................................................................. $ 483.93
142
81.8 %
2021
Year Ended December 31,
2019
2018
2020
142
55.4 %
142
82.1 %
142
81.0 %
2017
142
77.1 %
$ 425.89
$ 235.99
$ 451.84
$ 371.12
$ 431.67
$ 349.64
$ 430.59
$ 331.87
Selected Financial Information. The following table shows certain selected financial information regarding the Pier House
Resort & Spa since 2019 (dollars in thousands):
Total Revenue ...................................................................................................................................... $ 31,408
Rooms Revenue ...................................................................................................................................
25,082
Hotel EBITDA(1)
..................................................................................................................................
18,039
Hotel EBITDA Margin (1)
....................................................................................................................
2021
Year Ended December 31,
2020
$ 15,753
12,265
6,707
2019
$ 25,056
19,235
11,700
57.4 %
42.6 %
46.7 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
Bardessono Hotel and Spa, Yountville, California
On July 9, 2015, we acquired a 100% leasehold interest in the Bardessono Hotel and Spa in Yountville, California, which
is subject to a ground lease that initially expires in 2065, with two 25-year extension options. The Bardessono Hotel and Spa
was built in 2009 and has 65 luxurious rooms and suites. Built and operated with a primary focus on green practices, the hotel is
one of three LEED Platinum certified hotels in California and one of thirteen LEED Platinum certified hotels in the United
States. In 2016 the meeting space was renovated. In 2019 we completed construction of a 3,705 square foot Maple Grove Villa,
which consists of three large suites, each of which boasts a distinctive great room, stately king bedroom, spa bathroom,
courtyard and plunge pool. Approximately $8.3 million has been spent on capital expenditures since the acquisition of the hotel
in July 2015.
The hotel is located in Yountville, California and enjoys a central location in the heart of Napa Valley. It offers exceptional
amenities, including large, well-appointed guest rooms and suites with private patios/balconies. Guest rooms have fireplaces
and oversized bathrooms, many featuring steam showers and a second shower located outdoors in a private garden.
Additional property highlights include:
• Meeting Space: Approximately 2,100 square feet of indoor and outdoor meeting space.
• Food and Beverage: The Bardessono Hotel and Spa offers the acclaimed 84-seat Lucy restaurant and bar.
• Other Amenities: The hotel offers an on-site spa and a fitness center. Outdoor amenities include a rooftop pool and a
vegetable garden. Complimentary bicycles and five Lexus vehicles are available for guest use.
Location and Access. The hotel is approximately 60 miles north of San Francisco, approximately 68 miles from the San
Francisco International Airport and approximately 60 miles from the Oakland International Airport. The hotel is located within
the town of Yountville, offering numerous retail and restaurant establishments including the famed French Laundry. Yountville
is in the heart of the Napa Valley, a premier wine and culinary destination with over 450 wineries. In addition to the valley’s
traditional wine and dining attractions, the region is also known as a popular leisure destination for hiking, biking, golfing,
shopping and festivals.
13
Operating History. The following table shows certain historical information regarding the Bardessono Hotel and Spa since
2017:
Rooms .......................................................................................................
Occupancy .................................................................................................
ADR .......................................................................................................... $ 1,141.39
RevPAR ..................................................................................................... $ 775.18
65
67.9 %
2021
Year Ended December 31,
2019
2018
2020
65
40.3 %
65
75.1 %
62
76.8 %
2017
62
77.0 %
$ 778.43
$ 313.89
$ 792.41
$ 595.19
$ 796.93
$ 611.84
$ 770.19
$ 592.77
Selected Financial Information. The following table shows certain selected financial information regarding the Bardessono
Hotel and Spa since 2019 (dollars in thousands):
Total Revenue ...................................................................................................................................... $ 23,329
Rooms Revenue ...................................................................................................................................
18,391
Hotel EBITDA (1)
.................................................................................................................................
9,208
Hotel EBITDA Margin (1)
....................................................................................................................
2021
Year Ended December 31,
2020
$ 9,921
7,467
1,018
2019
$ 19,060
13,633
5,610
39.5 %
10.3 %
29.4 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
The Ritz-Carlton, St. Thomas, U.S. Virgin Islands
On December 15, 2015, we acquired a 100% interest in The Ritz-Carlton St. Thomas on the island of St. Thomas, U.S.
Virgin Islands. The Ritz-Carlton St. Thomas opened in 1996 and has 155 luxurious guest rooms and 25 suites, all featuring a
spacious private balcony with ocean or resort views. Approximately $111.7 million has been spent on capital expenditures since
the acquisition of the hotel in December 2015. Capital investment has recently been focused on remediation and reconstruction
effort due to damage sustained after Hurricane Irma. The hotel operated as a 59-room Marriott-affiliated non-branded hotel for
the majority of 2019 and re-opened as a full service Ritz-Carlton resort in late November 2019.
Additional property highlights include:
• Meeting Space: The property has more than 10,000 square feet of indoor and outdoor meeting and function space
offering stunning views of Great Bay and neighboring St. John.
• Food and Beverage: The property features (i) the 163 seat Bleuwater Restaurant; (ii) Alloro, a 100-seat Italian
restaurant; (iii) Sails, a 155-seat beachside restaurant and bar; and (iv) Coconut Cove, a second beachside 118-seat
restaurant, on the grounds of the adjacent Ritz-Carlton Destination Club. A new fresh service market, Southwind,
opened in 2020, serving coffee, sandwiches, ice cream and other light fare.
• Other Amenities: The resort offers a beachfront infinity-edge pool, as well as a children’s pool and hot tub, a 7,500
square foot full-service award-winning spa and a 2,000 square foot fitness center. The resort also offers the Ritz Kids
Club.
Location and Access. The hotel is located on 30 oceanfront acres along Great Bay, St. Thomas, U.S. Virgin Islands. It is
1.6 miles from Urman Victor Fredericks Marine Terminal in Red Hook and 11 miles from Cyril E. King Airport.
Operating History. The following table shows certain historical information regarding The Ritz-Carlton St. Thomas since
2017:
Rooms .......................................................................................................
Occupancy .................................................................................................
ADR .......................................................................................................... $ 1,049.29
RevPAR ..................................................................................................... $ 834.39
180
79.5 %
2021
14
Year Ended December 31,
2019
2018
2020
180
38.9 %
180
48.6 %
180
79.2 %
2017
180
79.9 %
$ 665.20
$ 258.43
$ 616.91
$ 299.87
$ 283.22
$ 224.31
$ 553.27
$ 442.26
Selected Financial Information. The following table shows certain selected financial information regarding The Ritz-
Carlton St. Thomas since 2019 (dollars in thousands):
Total Revenue ...................................................................................................................................... $ 80,321
Rooms Revenue ...................................................................................................................................
54,819
Hotel EBITDA (1)
.................................................................................................................................
27,550
Hotel EBITDA Margin (1)
....................................................................................................................
2021
Year Ended December 31,
2020
$ 31,595
16,771
4,624
2019
$ 26,122
3,295
11,399
34.3 %
14.6 %
43.6 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
The Park Hyatt Beaver Creek Resort & Spa, Beaver Creek, Colorado
On March 31, 2017, we acquired a 100% interest in the 190-room Park Hyatt Beaver Creek Resort & Spa in Beaver Creek,
Colorado. Located in the heart of Beaver Creek Village, approximately 100 miles west of Denver, it is located in one of the
most exclusive resort destinations in North America. The Park Hyatt Beaver Creek Resort & Spa is an integral part of the
Beaver Creek Village as the only full-service hotel with direct ski-in/ski-out access. The Park Hyatt Beaver Creek Resort & Spa
was built in 1989 and has 190 luxurious and spacious rooms, including 81 king rooms, 66 double/double rooms, 20 double/
queen rooms, one suite parlor and 22 suites. The hotel underwent a full lobby renovation in 2019, which included a new lobby
bar and the addition of an epicurean market. Approximately $10.8 million has been spent on capital expenditures since the
acquisition of the hotel in March 2017.
Additional property highlights include:
• Meeting Space: The property has over 20,000 square feet of flexible indoor and outdoor event space and is home to the
largest ballroom in Vail Valley.
• Food and Beverage: The property has four food and beverage outlets, including the world-class 8100 Mountainside
Bar & Grill, the Brass Bear Bar, the Fall Line epicurean market and Powder 8 Kitchen & Tap, serving the Beaver
Creek community and hotel guests during the ski season.
• Other Amenities: The resort offers an array of amenities, including the award-winning 30,000 square foot Exhale Spa,
a heated outdoor pool and five outdoor hot tubs beneath a mountain waterfall, 24-hour state-of-the-art fitness club, ski
valet service, outdoor fire pits and guest access to two private championship golf courses and the Beaver Creek Tennis
Center. The property also features over 18,800 square feet of fully leased, highly visible retail space in the heart of
Beaver Creek.
Location and Access. Located in the heart of Beaver Creek Village, Colorado, the Park Hyatt Beaver Creek Resort & Spa is
positioned as the leading resort in one of North America’s most renowned luxury resort destinations. Beyond the world-class
hotel, guests have easy access to Beaver Creek’s famous amenities, including exceptional dining and luxury boutique shopping,
the 535-seat Vilar Performing Arts Center where festivals and large events are held and an outdoor ice skating rink. While the
Vail Valley is home to some of the top ski areas in the world and is a well-known winter destination, it has become very
popular as a summer destination due to its proximity to diverse leisure activities, including hiking, biking, horseback riding,
white water rafting, fishing, golfing and festivals.
Operating History. The following table shows certain historical information regarding the Park Hyatt Beaver Creek Resort
& Spa since 2017:
Rooms ...................
Occupancy .............
ADR ...................... $ 454.17
RevPAR ................ $ 249.50
190
54.9 %
Year Ended December 31,
2021
2020
2019
2018
190
33.9 %
190
59.1 %
190
61.7 %
Year Ended
December 31,
2017 (combined)
190
61.3 %
Period from
March 31, 2017
through
December 31, 2017
190
53.9 %
Period from
January 1, 2017
through
March 30, 2017
190
83.7 %
$ 544.68
$ 184.75
$ 444.54
$ 262.57
$ 428.59
$ 264.59
$
$
441.98
270.90
$
$
310.52
167.51
$
$
700.74
586.82
15
Selected Financial Information. The following table shows certain selected financial information regarding the Park Hyatt
Beaver Creek Resort & Spa since 2019 (dollars in thousands):
Total Revenue .............................................................................................................................................. $ 36,184
Rooms Revenue ...........................................................................................................................................
17,303
Hotel EBITDA(1)
9,609
Hotel EBITDA Margin (1)
.........................................................................................................................................
...........................................................................................................................
2021
Year Ended December 31,
2020
$ 25,554
12,847
4,977
2019
$ 40,688
18,209
10,142
26.6 %
19.5 %
24.9 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
The hotel operating results for the period from March 31, 2017 through December 31, 2017, represent the operating results
since the acquisition of the hotel on March 31, 2017. The hotel operating results for the period from January 1, 2017 through
March 30, 2017, represent the period before our ownership and were obtained from the prior owner. The Company performed a
limited review of the information as part of its analysis of the acquisition. No financial statements were prepared, audited or
reviewed for the period from January 1, 2017 through March 30, 2017.
Hotel Yountville, Yountville, California
On May 11, 2017, we acquired a 100% interest in the 80-room Hotel Yountville in Yountville, California. The Hotel
Yountville was originally built in 1998 and, in 2011, underwent an extensive expansion and renovation that upgraded all guest
rooms, adding 29 new guest rooms, and added a restaurant, spa, meeting and event space, an outdoor pool, and lounge patio.
Currently, the property has 80 luxury rooms consisting of 62 king rooms, eight double/queen rooms and 10 suites. We are in the
early stages of planning a rooms renovation, which is expected to occur in 2023. Approximately $2.8 million has been spent on
capital expenditures since the acquisition of the hotel in May 2017.
Additional property highlights include:
• Meeting Space: The property has approximately 4,400 square feet of indoor and outdoor event space.
• Food and Beverage: The property has the acclaimed 46-seat Heritage Oak restaurant and bar, in-room dining service
and complimentary wine tastings.
• Other Amenities: The property offers well-appointed guest rooms and suites with private patios/balconies and a 6,500
square foot on-site spa. Its outdoor amenities are notable as well, including a resort-style outdoor heated pool and
lounge, landscaping and water features, and the availability of complimentary bicycles for guest use.
Location and Access. Located in the heart of Yountville, California, the Hotel Yountville is approximately 60 miles north
of San Francisco and enjoys a central location in the heart of the Napa Valley, widely acclaimed as the continent’s premier wine
and culinary destination with over 450 wineries. Known as the “Culinary Capital of the Napa Valley,” Yountville boasts an
array of restaurants by famed chefs, earning more Michelin stars per capita than any other place in North America. In addition
to the valley’s traditional wine and dining attractions, the region is also known as a popular leisure destination for hiking,
biking, golfing, shopping and festivals.
Operating History. The following table shows certain historical information regarding the Hotel Yountville since 2017:
Rooms ..................
Occupancy ...........
ADR ..................... $ 762.15
RevPAR ............... $ 441.29
80
57.9 %
Year Ended December 31,
2021
2020
2019
2018
80
29.5 %
80
73.9 %
80
74.7 %
Year Ended
December 31,
2017 (combined)
80
73.1 %
Period from May
11, 2017 through
December 31, 2017
80
71.8 %
$ 526.17
$ 155.01
$ 558.52
$ 412.82
$ 558.38
$ 417.08
$
$
543.95
397.69
$
$
603.21
433.00
$
$
16
Period from
January 1, 2017
through
May 10, 2017
80
75.5 %
442.11
333.88
Selected Financial Information. The following table shows certain selected financial information regarding the Hotel
Yountville since 2019 (dollars in thousands):
Total Revenue .............................................................................................................................................. $ 15,175
Rooms Revenue ...........................................................................................................................................
12,886
Hotel EBITDA (1)
6,433
Hotel EBITDA Margin (1)
........................................................................................................................................
...........................................................................................................................
2021
$
Year Ended December 31,
2020
5,751
4,539
(86)
(1.5) %
2019
$ 15,305
12,054
6,202
42.4 %
40.5 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
The hotel operating results for the period from May 11, 2017 through December 31, 2017 represent the operating results
since the acquisition of the hotel on May 11, 2017. The hotel operating results for the period from January 1, 2017 through May
10, 2017 represent the period before our ownership and were obtained from the prior owner. The Company performed a limited
review of the information as part of its analysis of the acquisition. No financial statements were prepared, audited or reviewed
for the period from January 1, 2017 through May 10, 2017.
The Ritz-Carlton, Sarasota, Florida
On April 4, 2018, we acquired a 100% interest in the Ritz-Carlton Sarasota in Sarasota, Florida for $171.4 million and
a 22-acre plot of vacant land for $9.7 million. Approximately $13.0 million has been spent on capital expenditures since the
acquisition of the hotel in April 2018.
The Ritz-Carlton Sarasota was built in 2001 and has 276 luxurious and spacious rooms, including 31 suites. The resort also
offers an array of amenities, including a 26,000 square foot Beach Club with 410 feet of beachfront, a private, luxury Tom
Fazio designed Golf Club, the award-winning 15,000 square foot Ritz-Carlton Spa, eight food and beverage outlets, including
the acclaimed Jack Dusty waterfront restaurant, 29,000 square feet of flexible indoor meeting space, two outdoor pools, 24-hour
state-of-the-art fitness club and lighted tennis courts.
Additional property highlights include:
• Meeting Space: The property has a 26,000-square-foot conference center, outdoor venues for up to 1,200 guests as
well as venues overlooking the Gulf of Mexico.
• Food and Beverage: The property features four different restaurants, including the nautically inspired Jack Dusty and
Ridley’s Porch, the relaxed beachfront Lido key Tiki Bar, as well as the Golf Club Grille overlooking the entire golf
course.
• Other Amenities: The property offers 276 guest rooms with private balconies, a serene private beach club on Lido Key,
18 holes of championship golf and a luxurious spa.
Location and Access. Located on Sarasota Bay in downtown Sarasota, the property, with its premier location, luxury-brand
affiliation and world-class amenities, is positioned as the leading resort in one of country’s fastest growing markets. Sarasota,
located approximately 60 miles south of Tampa, is a popular and growing upscale, year-round destination on the west coast
of Florida. Beyond the first-class hotel experience, guests have easy access to the Sarasota area’s many amenities and activities,
including exceptional dining and shops, art galleries, beaches, museums, boating, fishing, and golfing.
Operating History. The following table shows certain historical information regarding The Ritz-Carlton Sarasota since
2017:
Year Ended December 31,
2020
2019
266
54.0 %
266
73.4 %
Rooms ....................
2021
276
Occupancy .............
ADR ....................... $ 545.68
RevPAR ................. $ 420.14
77.0 %
Year Ended
December 31, 2018
(combined)
Period from
April 4, 2018
through December
31, 2018
Period from
January 1, 2018
through April 3,
2018
Year Ended
December 31,
2017
266
73.4 %
375.23
275.25
$
$
266
71.5 %
334.02
238.74
$
$
266
78.9 %
484.46
382.06
$
$
266
78.1 %
364.04
284.38
$ 410.53
$ 391.92
$ 221.49
$ 287.68
$
$
17
Selected Financial Information. The following table shows certain selected financial information regarding The Ritz-
Carlton Sarasota since 2019 (dollars in thousands):
Total Revenue ........................................................................................................................................................ $
Rooms Revenue .....................................................................................................................................................
Hotel EBITDA (1)
Hotel EBITDA Margin (1)
..................................................................................................................................................
......................................................................................................................................
Year Ended December 31,
2021
82,808
40,892
25,663
2020
$
49,531
$
21,564
11,502
2019
65,524
27,931
13,626
31.0 %
23.2 %
20.8 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
The hotel operating results for the period from April 4, 2018 through December 31, 2018, represent the operating results
since the acquisition of the hotel on April 4, 2018. The hotel operating results for the period from January 1, 2018 through April
3, 2018 and for the year ended December 31, 2017 represent periods before our ownership and were obtained from the prior
owner. The Company performed a limited review of the information as part of its analysis of the acquisition. The financial
statements as of and for the year ended December 31, 2017 were audited and included in an amendment to our Current Report
on Form 8-K filed on June 20, 2018. No financial statements were prepared, audited or reviewed for the period from January 1,
2018 through April 3, 2018.
The Ritz-Carlton, Lake Tahoe, California
On January 15, 2019, we acquired a 100% interest in the 170-room Ritz-Carlton Lake Tahoe located in Truckee, California
for $120.0 million. Approximately $4.6 million has been spent on capital expenditures since the acquisition of the hotel in
January 2019.
The Ritz-Carlton Lake Tahoe was built in 2009 and has 170 luxurious and spacious rooms, including 17 suites. The resort
also offers an array of amenities, including ski-in/ski-out access to Northstar Ski Mountain, the ultra-luxury Lake Club on the
shore of Lake Tahoe, a 17,000 square foot full-service spa, six food and beverage outlets, including the acclaimed Manzanita
restaurant, over 37,000 square feet of flexible indoor/outdoor meeting space, two outdoor pools, state-of-the-art fitness club and
yoga studio, and the Ritz Kids Club.
Additional property highlights include:
• Meeting Space: The property has over 37,000 square feet of meeting space including 15,000 square feet of outdoor
event space with the dramatic fireside terrace, two elegant ballrooms and the waterfront Lake Club, a multi-level venue
for intimate events.
• Food and Beverage: The property features six food and beverage outlets, including the extraordinary North Lake
Tahoe dining in Manzanita, featuring artfully crafted cuisine and Backyard Bar and BBQ, featuring St. Louis style
BBQ favorites.
• Other Amenities: The property offers 170 luxurious guest rooms and suites with in-room gas fireplaces and floor-to-
ceiling windows, a 17,000 square foot slope-side spa with treatments themed around nature and the Ritz Kids
children’s program.
Location and Access. Located in the North Lake Tahoe area, the property is situated mid-mountain at the Northstar Ski
Area. With its premier location, luxury brand affiliation and world-class amenities, The Ritz-Carlton Lake Tahoe is positioned
as the leading resort in one of the country’s most popular tourist destinations. North Lake Tahoe, located approximately 45
minutes from Reno, Nevada and two hours from Sacramento, is a popular and growing upscale, year-round tourist destination.
Beyond the first-class hotel experience, guests have easy access to the Lake Tahoe area’s many amenities and activities,
including world-class skiing and winter sports, boating, fishing, hiking, golfing, as well as exceptional dining and shops.
18
Operating History. The following table shows certain historical information regarding The Ritz-Carlton Lake Tahoe since
2018:
Year Ended December 31,
2021
2020
170
55.0 %
170
43.7 %
Year Ended
December 31,
2019 (combined)
Period from
January 15, 2019
through
December 31, 2019
Period from
January 1, 2019
through
January 14, 2019
Year Ended
December 31, 2018
(unaudited)
170
67.8 %
170
67.4 %
170
77.5 %
642.81
353.56
$
$
553.44
241.72
$
$
572.58
388.09
$
$
556.11
374.76
$
$
931.53
722.13
$
$
170
66.6 %
512.66
341.64
Rooms ...............................................
Occupancy ........................................
ADR .................................................. $
RevPAR ............................................ $
__________________
The above information does not include the operations of ten condominium units not owned by The Ritz-Carlton Lake Tahoe.
Selected Financial Information. The following table shows certain selected financial information regarding The Ritz-
Carlton Lake Tahoe since 2019 (dollars in thousands):
Year Ended December 31,
2021
2020
Year Ended
December 31, 2019
(combined)
Period from
January 15, 2019 through
December 31, 2019
Period from
January 1, 2019 through
January 14, 2019
Total Revenue ....................................... $
Rooms Revenue (1)
................................
Hotel EBITDA (2)
..................................
Hotel EBITDA Margin (2)
.....................
43,133
$
27,237
$
46,172
$
43,274
$
21,938
7,835
15,040
1,867
18.2 %
6.9 %
24,081
9,007
19.5 %
22,362
8,175
18.9 %
2,898
1,719
832
28.7 %
__________________
(1) Rooms revenue does not include the operations of ten condominium units not owned by The Ritz-Carlton Lake Tahoe.
(2) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
The hotel operating results for the year ended December 31, 2018, represent the period before our ownership and were
obtained from the prior owner. The Company performed a limited review of the information as part of its analysis of the
acquisition. No financial statements were prepared, audited or reviewed for the year ended December 31, 2018 and the period
from January 1, 2019 through January 14, 2019.
Mr. C Beverly Hills Hotel, Beverly Hills, California
On August 5, 2021, the Company acquired a 100% interest in the 138-room Mr. C Beverly Hills Hotel and five luxury
residences adjacent to the hotel. Approximately $134,000 has been spent on capital expenditures since the acquisition.
The Mr. C was built in 1965 and underwent an extensive renovation in 2011. It has 138 luxurious and spacious rooms,
including 12 suites and 10 mini suites. It is a luxury hotel ideally located in close proximity to high-end shopping on Rodeo
Drive and business demand from Century City and Culver City.
Additional property highlights include:
• Meeting Space: The property has over 24,000 sq. ft. of flexible indoor/outdoor meeting space.
• Food and Beverage: The property also boasts the acclaimed The Restaurant, which entices travelers and Angelenos
alike with its truly authentic Italian flavor by the fourth generation Cipriani.
• Other Amenities: The property offers outdoor pool terrace with daybeds and cabanas, state-of-the-art fitness center and
a business center. Additionally, the property includes five newly-constructed and fully-furnished residences which
blend contemporary architecture with elegant, minimalistic design and range in size from 2,000 to 3,400 sq. ft. The
residences are currently offered for extended-stay rentals.
Location and Access. With its premier location in the heart of West Los Angeles, the property is in the middle of more than
45 million sq. ft. of office space, supporting substantial corporate demand and a wide array of world-renowned leisure demand
generators, including unrivaled shopping with high-end retailers, vibrant restaurants and various art and cultural attractions.
19
Operating History. The following table shows certain historical information regarding The Mr. C Beverly Hills Hotel since
2019:
Year Ended
December 31, 2021
(combined)
Period from
August 5, 2021 through
December 31, 2021
Period from
January 1, 2021 through
August 4, 2021
Year Ended December 31,
2020
2019
Rooms ..............................................
Occupancy .......................................
ADR ................................................ $
RevPAR ........................................... $
143
50.1 %
327.85
164.36
$
$
143
63.9 %
332.86
212.62
$
$
143
40.7 %
143
30.5 %
143
74.5 %
322.42
131.07
$
$
336.43
102.67
$
$
334.40
249.05
Selected Financial Information. The following table shows certain selected financial information regarding The Mr. C
Beverly Hills Hotel since 2019 (dollars in thousands):
Year Ended
December 31, 2021
(combined)
Period from
August 5, 2021 through
December 31, 2021
Period from
January 1, 2021 through
August 4, 2021
Total Revenue .................................. $
Rooms Revenue ...............................
Hotel EBITDA (1)
Hotel EBITDA Margin (1)
.............................
................
12,864
$
8,579
2,280
17.7 %
$
6,592
4,531
1,052
16.0 %
Year Ended December 31,
2020
8,405
5,373
434
$
2019
20,610
12,999
4,694
$
6,272
4,048
1,228
19.6 %
5.2 %
22.8 %
__________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a
reconciliation of net income (loss) to Hotel EBITDA by property.
The hotel operating results for the period from August 5, 2021 through December 31, 2021 represent the operating results
since the acquisition of the hotel on August 5, 2021. The hotel operating results for the period from January 1, 2021 through
August 4, 2021 and for the years ended December 31, 2020 and 2019 represent periods before our ownership and were obtained
from the prior owner. The Company performed a limited review of the information as part of its analysis of the acquisition. No
financial statements were prepared, audited or reviewed for the years ended December 31, 2020 and 2019 and for the period
from January 1, 2021 through August 4, 2021.
Asset Management
The senior management team, provided to us by Ashford LLC, facilitated all asset management services for our hotel
properties prior to our spin-off from Ashford Trust and continues to do so, including for the properties we acquired after the
spin-off. The team of professionals provided by Ashford LLC proactively works with our third-party hotel management
companies and Remington Hotels to attempt to maximize profitability at each of our hotel properties. The asset management
team monitors the performance of our hotel properties on a daily basis and holds frequent ownership meetings with personnel at
the hotel properties and with key executives of the brands and management companies. The asset management team works
closely with our third-party hotel management companies and Remington Hotels on key aspects of each hotel’s operation,
including, among others, revenue management, market positioning, cost structure, capital and operational budgeting as well as
the identification of return on investment initiatives and overall business strategy. In addition, we retain approval rights on key
staffing positions at many of our hotel properties, such as the hotel’s general manager and director of sales. We believe that our
strong asset management process helps to ensure that each hotel is being operated to our and our hotel management companies’
stated standards, that our hotel properties are being adequately maintained in order to preserve the value of the asset and the
safety of the hotel to customers, and that our hotel management companies are maximizing revenue and enhancing operating
margins. See “Certain Agreements—The Advisory Agreement.”
Hotel Management
As a result of Ashford Inc.’s November 2019 acquisition of the hotel management business from Remington Lodging,
Ashford Inc. also provides us with hotel management services through Remington Hotels, including hotel operations, sales and
marketing, revenue management, budget oversight, guest service, asset maintenance (not involving capital expenditures) and
related services. See “Certain Agreements-Hotel Management Agreement.”
Design and Construction Services
As a result of Ashford Inc.’s August 2018 acquisition of Premier from affiliates of Remington Lodging, Ashford Inc. also
provides us with design and construction services through Premier, including construction management, interior design,
architectural oversight, and the purchasing, expediting, warehousing coordination, freight management and supervision of
20
installation of furniture, fixtures and equipment (“FF&E”), and related services. See “Certain Agreements—Premier Master
Project Management Agreement.”
Third-Party Agreements
Hotel Management Agreements. Ten of our hotel properties are operated pursuant to a hotel management agreement with
one of four brand hotel management companies and four of our hotel properties are operated pursuant to a hotel management
agreement with Remington Hotels, a hotel management company acquired by Ashford Inc. on November 6, 2019, from Mr.
Monty J. Bennett, chairman of our board of directors and chairman, chief executive officer and a significant stockholder of
Ashford Inc., and Mr. Archie Bennett, Jr., chairman emeritus of Ashford Trust. Each hotel management company receives a
base management fee and is also eligible to receive an incentive management fee if hotel operating income, as defined in the
respective management agreement, exceeds certain thresholds. The incentive management fee is generally calculated as a
percentage of hotel operating income after we have received a priority return on our investment in the hotel. See “Certain
Agreements—Hotel Management Agreements.”
Franchise Agreements. None of our hotel properties operate under franchise agreements. The hotel management
agreements with Marriott (or its affiliates), Hilton (or its affiliates), Hyatt or Accor allow ten of our hotel properties to operate
under the Marriott, Autograph Collection, The Ritz-Carlton, Hilton, Park Hyatt or Sofitel brand names, as applicable, and
provide benefits typically associated with franchise agreements and licenses, including, among others, the use of the Marriott,
Hilton, Hyatt or Accor, as applicable, reservation system and guest loyalty and reward program. Any intellectual property and
trademarks of Marriott (or its affiliates), Hilton (or its affiliates), Hyatt (or its affiliates) or Accor (or its affiliates), as
applicable, are exclusively owned and controlled by the applicable manager or an affiliate of such manager which grants the
manager rights to use such intellectual property or trademarks with respect to the applicable hotel.
Licensing Agreement. The Ritz-Carlton St. Thomas is subject to a License and Royalty Agreement (the “Royalty
Agreement”) which allows us to use The Ritz-Carlton brand for 50 years, subject to automatic renewal for two 10-year periods,
unless the brand management company notifies us of election not to renew at least one year before the end of the initial term or
the then-current renewal term. The Royalty Agreement is coterminous with the management agreement. In connection with our
ability to use The Ritz-Carlton brand, we are obligated to pay a royalty fee of 2.6% of gross revenues and an incentive royalty
of 20% of operating profit in excess of owner’s priority.
Additionally, in conjunction with the Mr. C Beverly Hills Hotel acquisition on August 5, 2021, we entered into an
Intellectual Property Sublicense Agreement, which allows us to continue to use certain proprietary marks associated with the
Mr. C brand name. In return, we pay licensing fees of: (i) 1% of total operating revenue; (ii) 2% of gross food and beverage
revenues; and (iii) 25% of food and beverage profits. The agreement expires on August 5, 2022.
Our Financing Strategy
As of December 31, 2021, our indebtedness was approximately $1.2 billion, with a weighted average interest rate of 2.65%
per annum. Approximately 7.3% of our debt bears interest at a fixed rate of 4.5% and the remaining 92.7% bears interest at the
variable rate of LIBOR plus 2.44%. We intend to continue to use variable-rate debt or a mix of fixed and variable-rate debt as
we see fit, and we may, if appropriate, enter into interest rate hedges.
We intend to finance our long-term growth and liquidity needs with operating cash flow, equity issuances of both common
and preferred stock, joint ventures, a revolving line of credit and secured and unsecured debt financings having staggered
maturities. We target leverage of 45% net debt to gross assets. We may also issue common units or other interests in our
operating partnership to acquire properties from sellers who seek a tax-deferred transaction.
We may utilize Lismore Capital II LLC (“Lismore”), a subsidiary of Ashford Inc. and its affiliates, to provide debt
placement and related services, which otherwise would be provided by third parties, for debt financings. The services provided
by Lismore include access to their deep industry contacts to achieve competitive terms in the market, due diligence support and
assistance in completing the financing transaction.
We may use the proceeds from any borrowings for working capital, consistent with industry practice, to:
•
•
•
purchase interests in partnerships or joint ventures;
finance the origination or purchase of debt investments; or
finance acquisitions, expand, redevelop or improve existing properties, or develop new properties or other uses.
21
Certain Agreements
The Advisory Agreement
We are advised by Ashford LLC, a subsidiary of Ashford Inc., pursuant to the Fifth Amended and Restated Advisory
Agreement, dated as of April 18, 2018, as amended on January 15, 2019, and as further amended on August 16, 2021, among
us, Braemar OP, Braemar TRS, Ashford Inc. and Ashford LLC. Pursuant to our advisory agreement, Ashford LLC acts as our
advisor, responsible for implementing our investment strategies and decisions and the management of our day-to-day
operations, subject to the supervision and oversight of our board of directors. We rely on Ashford LLC to provide, or obtain on
our behalf, the personnel and services necessary for us to conduct our business, and we have no employees of our own. All of
our officers are also employees of Ashford LLC.
Pursuant to the terms of our advisory agreement, Ashford LLC and its affiliates provide us with our management team,
along with appropriate support personnel as Ashford LLC deems reasonably necessary. Ashford LLC and its affiliates are not
obligated to dedicate any of their respective employees exclusively to us, nor are Ashford LLC, its affiliates or any of their
employees obligated to dedicate any specific portion of its or their time to our business except as necessary to perform the
service required of them in their capacity as our advisor. Ashford LLC is at all times subject to the supervision and oversight of
our board of directors. So long as Ashford LLC is our advisor, our governing documents require us to include two persons
designated by Ashford LLC as candidates for election as director at any stockholder meeting at which directors are to be
elected. Such nominees may be executive officers of our advisor. If the size of our board of directors is increased at any time to
more than seven directors, Ashford LLC’s right to nominate shall be increased by such number of directors as shall be
necessary to maintain the ratio of directors nominated by Ashford LLC to the directors otherwise nominated, as nearly as
possible (rounding to the next larger whole number), equal to the ratio that would have existed if our board of directors
consisted of seven members. The advisory agreement requires Ashford LLC to manage our business affairs in conformity with
the policies and the guidelines that are approved and monitored by our board of directors. Additionally, Ashford LLC must
refrain from taking any action that would (a) adversely affect our status as a REIT, (b) subject us to regulation under the
Investment Company Act of 1940, as amended, (c) knowingly and intentionally violate any law, rule or regulation of any
governmental body or agency having jurisdiction over us, (d) violate any of the rules or regulations of any exchange on which
our securities are listed, or (e) violate our charter, bylaws or resolutions of our board of directors, all as in effect from time to
time.
Duties of Ashford LLC. Subject to the supervision of our board of directors, Ashford LLC is responsible for our day-to-
day operations, including all of our subsidiaries and joint ventures, and shall perform (or cause to be performed) all services
necessary to operate our business as outlined in the advisory agreement. Those services include sourcing and evaluating hotel
acquisition and disposition opportunities, asset managing the hotel properties in our portfolio and overseeing the hotel
managers, handling all of our accounting, treasury and financial reporting requirements, and negotiating terms of loan
documents for our debt financings, as well as other duties and services outlined in the advisory agreement.
Any increase in the scope of duties or services to be provided by Ashford LLC must be jointly approved by us and Ashford
LLC and will be subject to additional compensation as outlined in the advisory agreement.
Ashford LLC is our sole and exclusive provider of asset management, design and construction and certain other services
offered by Ashford Inc. and its subsidiaries.
Ashford LLC also has the power to delegate all or any part of its rights and powers to manage and control our business and
affairs to such officers, employees, affiliates, agents and representatives of Ashford LLC or our company as it may deem
appropriate. Any authority delegated by Ashford LLC to any other person is subject to the limitations on the rights and powers
of our advisor specifically set forth in the advisory agreement or our charter.
Ashford LLC also acknowledges receipt of our code of business conduct and ethics, code of conduct for the chief executive
officer, chief financial officer and chief accounting officer and policy on insider trading and agrees to require its employees
who provide services to us to comply with the codes and the policy.
Limitations on Liability and Indemnification. The advisory agreement provides that Ashford LLC has no responsibility
other than to render the services and take the actions described in the advisory agreement in good faith and with the exercise of
due care and will not be responsible for any action our board of directors takes in following or declining to follow any of
Ashford LLC’s advice or recommendations. The advisory agreement provides that Ashford LLC (including its officers,
directors, managers, employees and members) will not be liable for any act or omission by it (or them) performed in accordance
with and pursuant to the advisory agreement, except by reason of acts constituting gross negligence, bad faith, willful
misconduct or reckless disregard of duties under the advisory agreement.
22
We have agreed to indemnify and hold harmless Ashford LLC (including its partners, directors, officers, stockholders,
managers, members, agents, employees and each other person or entity, if any, controlling Ashford LLC) to the full extent
lawful, from and against any and all losses, claims, damages or liabilities of any nature whatsoever with respect to or arising
from Ashford LLC’s acts or omissions (including ordinary negligence) in its capacity as such, except with respect to losses,
claims, damages or liabilities with respect to or arising out of Ashford LLC’s gross negligence, bad faith or willful misconduct,
or reckless disregard of its duties under the advisory agreement (for which Ashford LLC will indemnify us).
Term and Termination. The initial term of our advisory agreement shall expire on January 24, 2027, with up to seven
successive additional ten-year terms upon Ashford LLC’s written notice to us not less than 210 days prior to the expiration of
the then-current term of Ashford LLC’s election to extend the term of our advisory agreement.
We may terminate the advisory agreement at any time, including during the 10-year initial term, without the payment of a
termination fee under the following circumstances:
•
•
•
•
immediately upon providing written notice to Ashford LLC, following its conviction (including a plea or nolo
contendere) of a felony;
immediately upon providing written notice to Ashford LLC, if it commits an act of fraud against us, misappropriates
our funds or acts in a manner constituting willful misconduct, gross negligence or reckless disregard in the
performance of its material duties under the advisory agreement (including a failure to act); provided, however, that if
any such actions or omissions are caused by an employee and/or an officer of Ashford LLC (or an affiliate of Ashford
LLC) and Ashford LLC takes all reasonable necessary and appropriate action against such person and cures the
damage caused by such actions or omissions within 45 days of Ashford LLC’s actual knowledge of its commission or
omission, we will not have the right to terminate the advisory agreement;
immediately, upon the commencement of an action for dissolution of our advisor; or
(i) upon the entry by a court of competent jurisdiction of a final non-appealable order awarding monetary damages to
us based on a finding that our advisor committed a material breach or default of a material term, condition, obligation
or covenant of the advisory agreement, which breach or default had a material adverse effect on us, but only where our
advisor fails to pay the monetary damages in full within 60 days of the date when the monetary judgment becomes
final and non-appealable; provided, however, that if our advisor notified us that our advisor is unable to pay any
judgment for monetary damages in full within 60 days of when the judgment becomes final and non-appealable, we
may not terminate the advisory agreement if, within the 60-day period, our advisor delivers a promissory note to us
having a principal amount equal to the unpaid balance of the judgment and bearing interest at 8.00% per annum, which
note shall mature on the 12-month anniversary of the date that the judgment becomes final and non-appealable; and (ii)
upon no less than 60 days’ written notice to our advisor, prior to initiating any proceeding claiming a material breach
or default by our advisor, of the nature of the default or breach and providing our advisor with an opportunity to cure
the default or breach, or if the default or breach is not reasonably susceptible to cure within 60 days, an additional cure
period as is reasonably necessary to cure the default or breach so long as our advisor is diligently and in good faith
pursuing the cure.
Either party may also terminate the advisory agreement, with the payment of a termination fee, upon the occurrence of a
change of control of the Company, provided that the party desiring to terminate the advisory agreement shall give written notice
to the other party on a date (i) no earlier than the date on which: (1) we enter into a change of control agreement; (2) our board
of directors recommends that our stockholders accept the offer made in a change of control tender; or (3) a voting control event
occurs; and (ii) no later than two days after the closing of a transaction contemplated by a change of control agreement,
completion of a change of control tender, or occurrence of a voting control event.
In connection with a termination due to a Company change of control event, our advisor may agree, in its sole discretion, to
provide transition services agreed to by the parties for a period of up to 30 days.
Fees and Expenses.
• Base Fee. The total monthly base fee is in an amount equal to 1/12th 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 below), 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.
“Net Asset Fee Adjustment” shall be equal to (i) the product of the Sold Non-ERFP Asset Amount (as more
particularly defined in the advisory agreement, but generally equal to the net sales prices of real property (other than
any Enhanced Return Hotel Assets (as defined in the ERFP Agreement)) sold or disposed of after the date of the ERFP
Agreement, commencing with and including the first such sale) and 0.70% plus (ii) the product of the Sold ERFP
Asset Amount (as more particularly defined in the advisory agreement, but generally equal to the net sales prices of
23
Enhanced Return Hotel Assets sold or disposed of after the date of the ERFP Agreement, commencing with and
including the first such sale) and 1.07%.
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
1/12th of the “G&A Ratio” multiplied by the total market capitalization of Braemar.
The “G&A Ratio” is calculated as the simple average of the ratios of total general and administrative expenses,
including any dead deal costs, less any non-cash expenses, paid in the applicable quarter by each member of a select
peer group, divided by the total market capitalization of such peer group member. The peer group for each company
may be adjusted from time-to-time by mutual agreement between Ashford LLC and a majority of our independent
directors. Each month’s base fee is determined based on prior month results and is payable in cash on the fifth business
day of the month for which the fee is applied.
•
Incentive Fee. In each year that (i) our common stock is listed for trading on a national securities exchange for each
day of the applicable year; and (ii) our total stockholder return (“TSR”) exceeds the “average TSR of our peer group”
we have agreed to pay an incentive fee.
For purposes of this calculation, our TSR means the sum, expressed as a percentage, of (i) the change in our common
stock price during the applicable period, plus (ii) the dividend yield paid during the applicable period (determined by
dividing dividends paid during the applicable period by our common stock price at the beginning of the applicable
period and including the value of any dividends or distributions with respect to common stock not paid in cash valued
in the reasonable discretion of our advisor).
The annual incentive fee is calculated as (i) 5% of the amount (expressed as a percentage but in no event greater than
25%) by which our annual TSR exceeds the average TSR for our peer group, multiplied by (ii) the fully diluted equity
value of our company at December 31 of the applicable year. To determine the fully diluted equity value, we will
assume that all units in our operating partnership, including long-term incentive plan (“LTIP”) units that have achieved
economic parity with the common units, if any, have been converted into shares of common stock and that the per
share value of each share of our common stock is equal to the closing price of our stock on the last trading day of the
year.
The incentive fee, if any, subject to the FCCR Condition (defined below), is payable in arrears in three equal annual
installments with the first installment payable on January 15 following the applicable year for which the incentive fee
relates and on January 15 of the next two successive years. Notwithstanding the foregoing, upon any termination of the
advisory agreement for any reason, any unpaid incentive fee (including any incentive fee installment for the stub
period ending on the termination date) will become fully earned and immediately due and payable without regard to
the FCCR Condition defined below. Except in the case when the incentive fee is payable on the date of termination of
the advisory agreement, up to 50% of the incentive fee may be paid in our common stock or in common units of our
operating partnership, at our discretion, with the balance payable in cash unless at the time for payment of the
incentive fee, Ashford LLC owns common stock or common units in an amount greater than or equal to three times the
base fee for the preceding four quarters or payment in such securities would cause the advisor to be subject to the
provision of the Investment Company Act of 1940, as amended, or payment in such securities would not be legally
permissible for any reason, in which case the entire incentive fee will be payable in cash.
Upon the determination of the incentive fee, except in the case of any termination of the advisory agreement in which
case the incentive fee for the stub period and all unpaid installments of an incentive fee shall be deemed earned and
fully due and payable, each one-third installment of the incentive fee shall not be deemed earned by the advisor or
otherwise payable by us unless we, as of the December 31 immediately preceding the due date for the payment of the
incentive fee installment, have a FCCR of 0.20x or greater (the “FCCR Condition”). For purposes of this calculation,
“FCCR” means our fixed charge coverage ratio, which is the ratio of adjusted EBITDA for the previous four
consecutive fiscal quarters to fixed charges, which includes all (i) our and our subsidiaries’ interest expense, (ii) our
and our subsidiaries’ regularly scheduled principal payments, other than balloon or similar principal payments which
repay indebtedness in full and payments under cash flow mortgages applied to principal, and (iii) preferred dividends
paid by us.
• Equity Compensation. To incentivize employees, officers, consultants, non-employee directors, affiliates and
representatives of Ashford LLC, or its affiliates, to achieve our goals and business objectives, as established by our
board of directors, in addition to the base fee and the incentive fee described above, our board of directors has the
authority to make equity awards to Ashford LLC or directly to employees, officers, consultants and non-employee
directors of Ashford LLC, or its affiliates, based on our achievement of certain financial and other hurdles established
by our board of directors. These annual equity awards are intended to provide an incentive to Ashford LLC and its
24
employees to promote the success of our business. The compensation committee of our board of directors has full
discretion regarding the grant of any annual equity awards, and other than the overall limitation on the total number of
shares that are authorized to be granted under our Second Amended and Restated 2013 Equity Incentive Plan (as
amended, the “2013 Equity Incentive Plan”) there are no limitations on the amount of these equity awards.
• Expense Reimbursement. Ashford LLC is responsible for all wages, salaries, cash bonus payments and benefits
related to its employees providing services to us (including any of our officers who are also employees or officers of
Ashford LLC), with the exception of any equity compensation that may be awarded by us to the employees of Ashford
LLC, or its affiliates, who provide services to us, the provision of certain internal audit, asset management and risk
management services and the international office expenses described below. We are responsible to pay or reimburse
Ashford LLC monthly for all other costs incurred by it on our behalf or in connection with the performance of its
services and duties to us, including, without limitation, tax, legal, accounting advisory, investment banking and other
third party professional fees, director fees and insurance (including errors and omissions insurance and any other
insurance required pursuant to the terms of the advisory agreement), debt service, taxes, insurance, underwriting,
brokerage, reporting, registration, listing fees and charges, travel and entertainment expenses, conference sponsorships,
transaction diligence and closing costs, dead deal costs, dividends, office space, the cost of all equity awards or
compensation plans established by us, including the value of awards made by us to Ashford LLC’s employees, and any
other costs which are reasonably necessary for the performance by Ashford LLC, or its affiliates, of its duties and
functions. In addition, we pay a pro rata share of Ashford LLC’s office overhead and administrative expenses incurred
in the performance of its duties and functions under the advisory agreement. There is no specific limitation on the
amount of such reimbursements.
In addition to the expenses described above, we are required to reimburse Ashford LLC monthly for our pro rata share
(as reasonably agreed to between Ashford LLC and a majority of our independent directors or our audit committee,
chairman of our audit committee or lead director) of (i) employment expenses of Ashford LLC’s internal audit
managers, insurance advisory and other Ashford LLC employees who are actively engaged in providing internal audit
services to us, (ii) the reasonable travel and other out-of-pocket expenses of Ashford LLC relating to the activities of
its internal audit employees and the reasonable third-party expenses which Ashford LLC incurs in connection with its
provision of internal audit services to us and (iii) all reasonable international office expenses, overhead, personnel
costs, travel and other costs directly related to Ashford LLC’s non-executive personnel who are located internationally
or that oversee the operations of international assets or related to our advisor’s personnel that source, investigate or
provide diligence services in connection with possible acquisitions or investments internationally. Such expenses shall
include but are not limited to salary, wage payroll taxes and the cost of employee benefit plans.
• Additional Services. If, and to the extent that, we request Ashford LLC to render services on our behalf other than
those required to be rendered by it under the advisory agreement, such additional services shall be compensated
separately at market rates, as defined in the advisory agreement.
Assignment. Ashford LLC may assign its rights under the agreement without our approval to any affiliate under the control
of Ashford Inc.
Relationship with the Advisor. Ashford LLC is a subsidiary of Ashford Inc. and advises us and Ashford Trust. Ashford
LLC, its equity holders and employees are permitted to have other advisory clients, which may include other REITs operating
in the real estate industry. If we materially revise our initial investment guidelines without the express written consent of
Ashford LLC, Ashford LLC will use its best judgment to allocate investment opportunities to us and other entities it advises,
taking into account such factors as it deems relevant, in its discretion, subject to any then-existing obligations of Ashford LLC
to such other entities. We have agreed that we will not revise our initial investment guidelines to be directly competitive with
the investment guidelines of Ashford Trust as of November 19, 2013. The advisory agreement gives us the right to equitable
treatment with respect to other clients of Ashford LLC, but does not give us the right to preferential treatment, except that
Ashford LLC and Ashford Trust have agreed that, so long as we have not materially changed our initial investment guidelines
without the express consent of Ashford LLC, any individual hotel investment opportunities that satisfy our investment focus
will be presented to our board of directors, who will have up to 10 business days to accept such opportunity prior to it being
available to Ashford Trust or any other entity advised by Ashford LLC.
To minimize conflict between us and Ashford Trust, the advisory agreement requires us to designate an investment focus
by targeted RevPAR, segments, markets and other factors or financial metrics. After consultation with Ashford LLC, we may
modify or supplement our investment guidelines from time to time by giving written notice to Ashford LLC; however, if we
materially change our investment guidelines without the express consent of Ashford LLC, Ashford LLC will use its best
judgment to allocate investment opportunities to us and Ashford Trust, taking into account such factors as it deems relevant, in
its discretion, subject to any then-existing obligations of Ashford LLC to other entities. In the advisory agreement, we declared
25
our initial investment guidelines to be hotel real estate assets primarily consisting of equity or ownership interests, as well as
debt investments when such debt is acquired with the intent of obtaining an equity or ownership interest, in:
•
•
•
full-service hotels and resorts with trailing 12 month average RevPAR or anticipated 12 month average RevPAR of at
least twice the then-current U.S. national average RevPAR for all hotels as determined with reference to the most
current Smith Travel Research reports, generally in the 20 most populous metropolitan statistical areas, as estimated by
the United States Census Bureau and delineated by the U.S. Office of Management and Budget;
luxury hotels and resorts meeting the RevPAR criteria set forth above and situated in markets that may be generally
recognized as resort markets; and
international hospitality assets predominantly focused in areas that are general destinations or in close proximity to
major transportation hubs or business centers, such that the area serves as a significant entry or departure point to a
foreign country or region of a foreign country for business or leisure travelers and meet the RevPAR criteria set forth
above (after any applicable currency conversion to U.S. dollars).
When determining whether an asset satisfies our investment guidelines, Ashford LLC must make a good faith
determination of projected RevPAR, taking into account historical RevPAR as well as such additional considerations as
conversions or reposition of assets, capital plans, brand changes and other factors that may reasonably be forecasted to raise
RevPAR after stabilization of such initiative.
If we elect to spin-off, carve-out, split-off or otherwise consummate a transfer of a division or subset of assets for the
purpose of forming a joint venture, a newly created private platform or a new publicly traded company to hold such division or
subset of assets constituting a distinct asset type and/or investment guidelines, we have agreed that any such new entity will be
advised by Ashford LLC pursuant to an advisory agreement containing substantially the same material terms set forth in our
advisory agreement.
If we desire to engage a third party for services or products (other than services exclusively required to be provided by our
hotel managers), Ashford LLC has the exclusive right to provide such services or products at typical market rates provided that
we are able to control the award of the applicable contract. Ashford LLC will have at least 20 days after we give notice of the
terms and specifications of the products or services that we intend to solicit to provide such services or products at market rates,
as determined by reference to fees charged by third-party providers who are not discounting their fees as a result of fees
generated from other sources. If a majority of our independent directors determine that Ashford LLC’s pricing proposal is not at
market rates, we are required to engage a consultant to determine the market rate for the services or products in question. We
will be required to pay for the services of the consultant and to engage Ashford LLC at the market rates determined by the
consultant if the consultant finds that the proposed pricing of Ashford LLC was at or below market rates. Alternatively, Ashford
LLC will pay the consultant’s fees and will have the option to provide the services or product at the market rates determined by
the consultant should the consultant find that the proposed pricing was above market rates.
To minimize conflicts between us and Ashford LLC on matters arising under the advisory agreement, the Company’s
Corporate Governance Guidelines provide that any waiver, consent, approval, modification, enforcement matters or elections
which the Company may make pursuant to the terms of the advisory agreement shall be within the exclusive discretion and
control of a majority of the independent members of our board of directors (or higher vote thresholds specifically set forth in
such agreements). In addition, our board of directors has established a Related Party Transactions Committee composed solely
of independent members of our board of directors to review all related party transactions that involve conflicts. The Related
Party Transactions Committee may make recommendations to the independent members of our board of directors (including
rejection of any proposed transaction). All related party transactions are approved by either the Related Party Transactions
Committee or the independent members of our board of directors.
ERFP Agreement
General. On January 15, 2019, we entered into the Enhanced Return Funding Program Agreement (the “ERFP
Agreement”) and Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement with the other parties to our
advisory agreement. The independent members of our board of directors and the independent members of the board of directors
of Ashford Inc., with the assistance of separate and independent legal counsel, engaged to negotiate the ERFP Agreement on
our behalf and on behalf of Ashford Inc., respectively. The ERFP Agreement replaced the “key money investments” previously
contemplated by our advisory agreement.
Under the ERFP Agreement, Ashford LLC agreed to provide $50 million to us in connection with our acquisition of
additional hotels recommended by Ashford LLC, with the option to increase the funding commitment to up to $100 million
upon mutual agreement by the parties. Under the ERFP Agreement, Ashford LLC is obligated to provide us with 10% of the
acquired hotel’s purchase price in exchange for FF&E at our properties, which is subsequently leased by Ashford LLC to our
26
TRSs on a rent-free basis. As a result of The Ritz-Carlton Lake Tahoe acquisition, we received $10.3 million from Ashford
LLC in the form of future purchases of hotel FF&E at Braemar hotel properties that is leased to us by Ashford LLC rent-free.
Under the ERFP Agreement, we must provide reasonable advance notice to Ashford LLC to request ERFP funds in
accordance with the ERFP Agreement. The ERFP Agreement requires that Ashford LLC acquire the related FF&E either at the
time of the property acquisition or at any time generally within two years of our acquisition of the hotel property.
Conditions to Funding. Ashford LLC has no obligation to provide any enhanced return investment in the event that (i) we
or our subsidiaries, as applicable, has materially breached any provision of the advisory agreement (provided that we shall be
entitled to cure any such breach prior to the applicable date of required acquisition of FF&E), (ii) any event or condition has
occurred or is reasonably likely to occur which would give rise to a right of termination in favor of Ashford LLC under the
advisory agreement or the ERFP Agreement, (iii) there would exist, immediately after such proposed enhanced return
investment, a Sold ERFP Asset Amount (as defined in the ERFP Agreement, but generally equal to the net sales prices of
Enhanced Return Hotel Assets sold or disposed of after the date of the ERFP Agreement, commencing with and including the
first such sale), or (iv) (a) Ashford LLC’s Unrestricted Cash Balance (as defined below) is, after taking into account the cash
amount anticipated to be required for the proposed enhanced return investment, less than fifteen million dollars ($15,000,000)
(the “Cash Threshold”) as of one week after the date that Braemar OP requires that Ashford LLC commit to fund an enhanced
return investment with respect to an Enhanced Return Hotel Asset or (b) Ashford LLC reasonably expects, in light of its then-
anticipated contractual funding commitments (including amounts committed pursuant to the ERFP Agreement but not yet paid)
and cash flows, to have an Unrestricted Cash Balance that is less than the Cash Threshold immediately after the expected date
of closing of the purchase of the Enhanced Return Hotel Asset.
For purposes of the ERFP Agreement, “Unrestricted Cash Balance” means, unrestricted cash of Ashford LLC; provided,
that any cash or working capital of Ashford Inc. or its other subsidiaries, including without limitation, Ashford Hospitality
Services LLC (“Ashford Services”), will be included in the calculation of “Unrestricted Cash Balance” if such funds have been
contributed, transferred or loaned from Ashford LLC to Ashford Services or such other subsidiaries for the purpose of avoiding,
hindering or delaying Ashford LLC’s obligations under the ERFP Agreement (it being understood that good faith loans or
advances to, or investments in, Ashford Services’ or such other subsidiaries’ existing businesses or new services or other
businesses, or the provision of working capital to Ashford Services or such other subsidiaries generally consistent with Ashford
Services’ or such other subsidiaries past practices, will not be deemed to have been made for the purpose of avoiding, hindering
or delaying Ashford LLC’s obligations under the ERFP Agreement).
Repayment Events. With respect to any acquisition of FF&E by Ashford LLC pursuant to the ERFP Agreement, if prior to
the date that is two years after such acquisition, (i) we are subject to a Company Change of Control (as defined in the advisory
agreement) or (ii) we or Ashford Inc. terminates the advisory agreement and we are required to pay the Termination Fee
thereunder (each of clauses (i) and (ii), a “Repayment Event”), Braemar OP is required to pay to Ashford LLC an amount equal
to one hundred percent (100%) of any enhanced return investments actually funded by Ashford LLC during such two-year
period.
Disposition of Enhanced Return Hotel Assets. If Braemar OP or its subsidiaries dispose of or cause to be disposed any
Enhanced Return Hotel Asset or other real property with respect to which Ashford LLC owns FF&E, including by way of a
foreclosure or deed-in-lieu of foreclosure by a mortgage or mezzanine lender of Braemar OP or its subsidiaries, we will
promptly identify, and Ashford LLC will acquire, in exchange for such FF&E, FF&E for use at another real property asset
leased by the applicable taxable REIT subsidiary (“TRS”) and with a fair market value equal to the value of such FF&E as
established in connection with such disposition.
Term. The initial term of the ERFP Agreement is two (2) years (the “Initial Term”), which began on January 15, 2019. At
the end of the Initial Term, the ERFP Agreement automatically renewed for one year and will automatically renew for
successive one (1) year periods (each such period a “Renewal Term”) unless either we or Ashford Inc., as applicable, provides
written notice to the other at least sixty (60) days in advance of the expiration of the Initial Term or Renewal Term, as
applicable, that such notifying party intends not to renew the ERFP Agreement. The ERFP Agreement may be terminated by us
in the event we have a right to terminate the advisory agreement or by Ashford Inc. in the event that it is entitled to transfer cash
owned by us but controlled by our advisor to the Termination Fee Escrow Account (as defined in the advisory agreement). The
amendments to the advisory agreement set forth in the ERFP Agreement will continue in force notwithstanding any termination
of the ERFP Agreement.
On November 8, 2021, the Company received written notice from the Advisor of its intention not to renew the ERFP
program. As a result, the ERFP Agreement was terminated in accordance with its terms on January 15, 2022.
27
\Hotel Management Agreements
General
For us to qualify as a REIT, we cannot directly or indirectly operate any of our hotel properties. Third parties must operate
our hotel properties. Our hotel properties are leased to TRS lessees (except for The Ritz-Carlton St. Thomas, which is owned by
a TRS), which in turn have engaged hotel managers to manage our hotel properties. Each of our hotel properties other than the
Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and Mr. C Beverly Hills Hotel (which are operated
by Remington Hotels) are operated pursuant to a hotel management agreement with one of four independent hotel management
companies: (1) Hilton Management LLC, (2) Marriott Hotel Services, Inc. or its affiliates, Ritz-Carlton (Virgin Islands), Inc.
and The Ritz-Carlton Hotel Company, L.L.C., (3) Accor and (4) Hyatt. The Ritz-Carlton is a registered trademark of The Ritz-
Carlton Hotel Company, L.L.C., an affiliate of Marriott, and Sofitel is a registered trademark of affiliates of Accor.
The terms of each of the hotel management agreements, as well as any remaining extension, are set forth in the table
below:
Hotel
Hilton La Jolla Torrey Pines .........................................
Capital Hilton ................................................................
Marriott Seattle Waterfront ...........................................
The Clancy ....................................................................
The Notary Hotel ...........................................................
The Ritz-Carlton Sarasota .............................................
Sofitel Chicago Magnificent Mile .................................
Pier House Resort & Spa ...............................................
Bardessono Hotel and Spa .............................................
The Ritz-Carlton St. Thomas ........................................
Park Hyatt Beaver Creek Resort & Spa ........................
Hotel Yountville ............................................................
The Ritz-Carlton Lake Tahoe ........................................
Mr. C Beverly Hills Hotel .............................................
Effective Date Expiration Date
Extension Options By Manager
12/17/2003
12/17/2003
5/23/2003
10/1/2020
7/16/2019
1/1/2015
3/30/2006
11/6/2019
11/6/2019
12/15/2015
12/11/1987
11/6/2019
3/28/2006
8/5/2021
12/31/2023 Three 10-year options
12/31/2023 Three 10-year options
12/31/2028 Five 10-year options
12/31/2027 Five 5-year options
12/31/2041 Two 10-year options
12/31/2030 Two 10-year options
12/31/2030 Three 10-year options
11/06/2029 Three 7-year options and one 4-year option
11/06/2029 Three 7-year options and one 4-year option
12/31/2065 Two 10-year options
12/31/2029 One 10-year option
11/06/2029 Three 7-year options and one 4-year option
12/31/2034 Two 10-year options
08/05/2031 Three 7-year options and one 4-year option
Each hotel management company receives a base management fee (expressed as a percentage of gross revenues) ranging
from 3.0%–5.0%, as well as an incentive management fee calculated as a percentage of hotel operating income, in certain cases
after funding of certain requirements, including the capital renewal reserve, and in certain cases after we have received a
priority return on our investment in the hotel (referred to as the owner’s priority), as summarized in the chart below:
Management
Fee(1)
3%
3%
3%
Hotel
Hilton La
Jolla Torrey
Pines
Capital
Hilton
Marriott
Seattle
Waterfront
Incentive Fee
20% of operating cash flow (after
deduction for capital renewals
reserve and owner’s priority)
20% of operating cash flow (after
deduction for capital renewals
reserve and owner’s priority)
After payment of owner’s 1st
priority, remaining operating profit
is split between owner and
manager, such that manager
receives 30% of remaining
operating profit that is less than
the sum of $15,113,000 plus
10.75% of owner-funded capital
expenses, and 50% of the
operating profit in excess of such
sum
Marketing Fee
Reimbursement of
hotel’s pro rata
share of group
services
Reimbursement of
hotel’s pro rata
share of group
services
Reimbursement of
the hotel’s pro rata
share of chain
services, capped at
2.2% of gross
revenues per fiscal
year
Owner’s Priority(2)
11.5% of owner’s total
investment
Owner’s
Investment(2)
$117,465,746
11.5% of owner’s total
investment
$139,691,230
$89,732,668
Owner’s 1st Priority: 10.75%
of owner’s investment
Owner’s 2nd Priority: After
payment of the owner’ 1st
priority, remaining operating
profit is split between owner
and manager, such that owner
receives 70% of remaining
operating profit that is less than
the sum of $15,113,000 plus
10.75% of owner-funded
capital expenses, and 50% of
the operating profit in excess of
such sum
28
Hotel
The Clancy
Management
Fee(1)
5%
The Notary
Hotel
4%
Incentive Fee
50% of the excess of operating
profit (after deduction for
contributions to the FF&E reserve)
over owner’s priority up to the
Spread Threshold of $3,000,000,
reduced to 25% for Operating
Profit exceeding the Spread
Threshold.
20% of the excess of
operating profit over owner’s
priority
Marketing Fee
System wide
contribution to the
marketing fund
(1.5% of gross
room sales)
System wide
contribution to the
marketing fund
(1.5% of gross
room sales).
Owner’s Priority(2)
$12,279,659, plus 11.5% of
owner funded capital expenses
Owner’s
Investment(2)
Not applicable
Not applicable
2019: $7,021,388
Thereafter: $8,938,867 Plus
10.25% of owner-funded
capital expenditures after the
effective date, the amount of
reserve shortfalls funded by
Owner after the effective date,
and the amount of owner-
funded capital expenditures
spent for completion of the
conversion of the hotel to The
Notary Hotel, up to
$18,000,000
3%
Sofitel
Chicago
Magnificent
Mile
Pier House
Resort &
Spa
Bardessono
Hotel and
Spa
The Ritz-
Carlton St.
Thomas
Park Hyatt
Beaver
Creek
Resort &
Spa
Hotel
Yountville
Greater of
$15,045.44
monthly or
3%
Greater of
$15,045.44
monthly or
3%
3.0%,
comprised of a
management
fee of 0.4%
and a royalty
fee of 2.6%
Greater of
3.0% or
$2,258,726 on
an annual
basis
(increased
annually by
lesser of CPI
or 8% of prior
year
management
fee)
Greater of
$15,045.44
monthly or 3%
The Ritz-
Carlton
Sarasota
3%
20% of the amount by which the
hotel’s annual net operating
income exceeds a threshold
amount (equal to 8% of our total
investment in the hotel), capped at
2.5% of gross hotel revenues
The lesser of 1% of gross revenues
or the amount by which actual
house profit exceeds budgeted
house profit
The lesser of 1% of gross revenues
or the amount by which actual
house profit exceeds budgeted
house profit
20% of the excess, if any, of
Operating Profit for such Fiscal
Year over owner’s priority for
such Fiscal Year
12.5% Profit plus 15% of Profit
less the Base Fee that is in excess
of $4 million
2% of gross hotel
revenues
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
1.0% of gross
revenues
$8,000,000 plus 10.25% of the
amount of owner-funded
capital expenditures (3)
Not applicable
Not applicable
Not applicable
Not applicable
The lesser of 1% of gross revenues
or the amount by which actual
house profit exceeds budgeted
house profit
20% of Available cash flow
defined as Net Operating Income
minus the owner’s priority
Not applicable
Not applicable
Not applicable
$7,465,000 plus 10.25% of the
amount of owner-funded
capital expenditures
Not applicable
1% of gross hotel
revenues for each
fiscal year,
excluding member
dues, initiation, or
joining fees or
deposits of Club
members
29
Management
Fee(1)
3%
Hotel
The Ritz-
Carlton
Lake Tahoe
Incentive Fee
The sum of (i) 15% of the amount
by which Adjusted House Profit
(“AHP”) for such Fiscal Year
exceeds the owner’s priority but is
less than $10.8 million plus (ii)
20% of the amount by which AHP
exceeds $10.8 million; provided,
however, that in no event shall the
total, aggregate sum of the Base
Fee and the Incentive Fee paid to
Operator in any given Fiscal Year
exceed 6% of gross revenues for
such Fiscal Year
Marketing Fee
1% of gross
revenues for each
fiscal year
Owner’s Priority(2)
$8,200,000 plus 10% of the
amount of owner-funded
capital expenditures in excess
of amounts in the reserve
Owner’s
Investment(2)
Not applicable
Mr. C
Beverly
Hills Hotel
Greater of
$15,045.44
monthly or 3%
The lesser of 1% of gross revenues
or the amount by which actual
house profit exceeds budgeted
house profit
Not applicable
Not applicable
Not applicable
__________________
(1) Management fee is expressed as a percentage of gross hotel revenue.
(2) Owner’s priority and owner’s investment amounts disclosed in the table are based on the most recent certification provided to us by the
applicable manager. For some properties these amounts will continue to increase over time by the amount of additional owner-funded
capital expenses.
(3)
In addition, dollar amounts no greater than $19,000,000 in the aggregate that are funded by owner for renovation projects will be treated
as owner-funded capital expenditures and give a one-time adjustment to owner’s priority for 13% of the amounts.
The hotel management agreements allow each hotel to operate under the Marriott, The Ritz-Carlton, Hilton, Sofitel or Park
Hyatt brand names, as applicable, and provide benefits typically associated with franchise agreements, including, among others,
the use of the Marriott, The Ritz-Carlton, Hilton, Sofitel or Hyatt, as applicable, reservation system and guest loyalty and
reward program. Any intellectual property and trademarks of Marriott (or its affiliates), The Ritz-Carlton, Hilton (or its
affiliates), Accor (or its affiliates), or Hyatt (or its affiliates), as applicable, are exclusively owned and controlled by the
applicable manager or an affiliate of such manager who grants the manager rights to use such intellectual property or
trademarks with respect to the applicable hotel.
Below is a summary of the principal terms of the hotel management agreements with Marriott (or its affiliates), Hilton (or
its affiliates), Accor, Hyatt and Remington Hotels.
Marriott Management Agreements
Term. The remaining base term of each of our six management agreements with Marriott (or its affiliates) ranges from
approximately 6 to 44 years, expiring between December 31, 2027 and December 31, 2065. Each of these agreements has
remaining automatic extension options at the discretion of the manager, ranging from two 10-year extensions to five 10-year
extensions.
Events of Default. An “Event of Default” under the hotel management agreements with Marriott (or its affiliates) is
generally defined to include the bankruptcy or insolvency of either party, the failure to make a payment under the hotel
management agreement and failure to cure such non-payment after due notice, and a breach by either party of any other
covenants or obligations in the hotel management agreement which continues beyond the applicable notice and cure period.
Termination Upon Event of Default. A non-defaulting party may terminate the hotel management agreement upon an
Event of Default (as defined in the applicable hotel management agreement) generally after the expiration of any notice and
cure periods; provided, however, the hotel management agreement may not be terminated by the non-defaulting party unless
and until such Event of Default has a material adverse effect on the non-defaulting party. In the case of The Notary Hotel and
The Clancy, if the defaulting party contests such Event of Default or such material adverse effect, the non-defaulting party may
not terminate unless a court of competent jurisdiction has issued a final, binding and non-appealable order finding that the
Event of Default has occurred and that the default resulted in a material adverse effect.
30
Early Termination for Casualty. The termination provisions for our hotel properties in the event of casualty are
summarized as follows:
•
If the hotel suffers a total casualty (meaning the cost of the damage to be repaired or replaced would be equal to 30%
or more of the then-total replacement cost in the case of the Marriott Seattle Waterfront, 33% or more of the then
replacement cost in the case of The Ritz-Carlton Lake Tahoe and The Ritz-Carlton Sarasota, and 60% or more of the
then-total replacement cost in the case of The Ritz-Carlton St. Thomas, The Clancy and The Notary Hotel), then either
party may terminate the hotel management agreement.
Early Termination for Condemnation. If all or substantially all of the hotel (meaning 1/3 or more of the replacement cost
therefor with respect to The Ritz-Carlton Lake Tahoe and The Ritz-Carlton Sarasota and 50% or more of the replacement value
of the hotel with respect to The Ritz-Carlton St. Thomas) is taken in any condemnation or similar proceeding, or a portion of
the hotel is so taken, and the result is that it is unreasonable to continue to operate the hotel in accordance with the hotel
management agreement, the hotel management agreement shall terminate (provided, however, with respect to The Ritz-Carlton
Lake Tahoe and The Ritz-Carlton Sarasota the hotel management agreement will be terminated at our option or the manager’s
option, and with respect to The Clancy and The Notary Hotel, the hotel management agreement will be terminated only at the
manager’s option).
Performance Termination. All of the hotel management agreements with Marriott (or its affiliates) are structured to
provide us with a right to terminate the hotel management agreement without the payment of a termination fee if the manager
fails to achieve certain criteria relating to the performance of the applicable hotel. The performance period is measured with
respect to any two consecutive fiscal years. The performance criteria generally includes each of the following: (i) operating
profit for each such fiscal year is less than the applicable performance termination threshold (as defined in the hotel
management agreement) which ranges from 9.5% to 10.25% of the approximate total investment in the hotel; provided,
however, in the case of The Notary Hotel, it is 85% of the owner’s priority return (as defined in the hotel management
agreement), and in the case of The Clancy, it is 82.6% of the owner’s priority return (as defined in the hotel management
agreement), (ii) the RevPAR penetration index of the hotel during each such fiscal year is less than the revenue index threshold
(as such terms are defined in the hotel management agreements) which range from 0.65 to 1.00 (this item is not applicable for
The Ritz-Carlton Lake Tahoe), and (iii) the fact that the criteria set forth in (i) or (ii) is not the result of an extraordinary event
or force majeure, any major renovation of the hotel adversely affecting a material portion of the income generating areas (or any
major renovation with respect to The Notary Hotel, The Clancy, The Ritz-Carlton Lake Tahoe, The Ritz-Carlton Sarasota, and
The Ritz-Carlton St. Thomas), or any default by us under the hotel management agreement. The manager has a right to avoid a
performance termination by paying to us the total amount by which the operating profit for each of the fiscal years in question
was less than the performance termination threshold for such fiscal years, or in the case of The Notary Hotel and The Clancy,
by waiving base management fees (and, with respect to The Ritz-Carlton St. Thomas, certain royalty fees owed to Marriott
Switzerland Licensing Company S.ar.L (St. Kitts & Nevis Branch)) until such time as the total amount of waived base
management fees equals the shortfall of operating profit for each of the fiscal years in question to the performance termination
threshold for such fiscal years.
Limitation on Termination Rights. Our ability to exercise termination rights is subject to certain limitations if the manager
or any of its affiliates are providing certain credit enhancements, loans or fundings as described in the hotel management
agreement, or in certain cases, if manager’s incentive management fee is outstanding.
Assignment and Sale. Each management agreement with Marriott (or its affiliates) contains restrictions on our ability to
sell the applicable hotel property or engage in certain change of control actions if (i) we are in default under the hotel
management agreement, (ii) the transferee is known to be of bad moral character or has been convicted of a felony or is in
control of or is controlled by persons who have been convicted of felonies, (iii) the transferee does not (in the reasonable
judgment of manager) have sufficient financial resources and liquidity to fulfill the owner’s obligations under the hotel
management agreement, or (iv) the transferee has an ownership interest, either directly or indirectly, in a brand or group of
hotels that competes with the manager or any affiliate thereof. The management agreements with Marriott (or its affiliates) may
have additional restrictions on our ability to sell the applicable hotel property or engage in certain change of control actions.
Any sale of the property (which includes any equity transfer, whether directly or indirectly) is subject to certain conditions,
including the provision of notice of such sale to the manager.
Right of First Offer. All of the management agreements with Marriott (or its affiliates) (except for the management
agreement for The Ritz-Carlton Lake Tahoe) provide the manager with a right of first negotiation with respect to a sale of the
hotel (which includes the equity transfer of a controlling interest in the owner of the hotel property, whether directly or
indirectly). A sale or transfer to an affiliate is specifically excluded from this right (except in the management agreement for
The Ritz-Carlton Sarasota). After notice of a proposed sale to the manager, we have a specified time period, ranging from 10
business days to 60 days, to negotiate an acceptable purchase and sale agreement. If after such time period no agreement is
signed, we are free to sell or lease the hotel to a third party, subject to certain conditions, such as providing notice of sale to the
31
manager (with certain details regarding the terms of sale). The manager then has a specified time period, ranging from 20 to 45
days, depending on our compliance with the assignment and sale provisions above, to either consent to such sale or not consent
to such sale. If the manager does not timely respond or consents to such sale, certain of the management agreements provide
that the sale must occur 180 days after provision of the notice of sale (the management agreement for The Ritz-Carlton St.
Thomas also requires that the sale must occur within 15 months after the manager’s 30-day negotiation period if the manager
makes an offer acceptable to us pursuant to the manager’s right of first offer; The Ritz-Carlton Sarasota management agreement
requires that the sale must occur within 365 days after the manager’s receipt of our original notice pertaining to the manager’s
right of first offer and The Notary Hotel and The Clancy management agreements require that the sale must occur within one
year after the expiration of the right of first negotiation period) or the notice of sale is deemed void and we must provide a new
notice to the manager.
Hilton Management Agreements
Term. The base term of each of our two management agreements with Hilton (or its affiliates) was 10 years, expiring
December 31, 2013. All of these agreements have been extended through December 31, 2023, and all of these agreements have
three 10-year automatic extension options remaining, at the discretion of the manager.
Events of Default. An “Event of Default” under the hotel management agreements with Hilton (or its affiliates) is
generally defined to include the bankruptcy or insolvency of either party, the failure to make a payment under the hotel
management agreement and failure to cure such non-payment after due notice, a breach by either party of any other covenants
or obligations in the hotel management agreement which continues beyond the applicable notice and grace period, failure to
maintain certain alcohol licenses and permits under certain circumstances, failure by us to provide manager with sufficient
working capital to operate the hotel after due notice and a termination of our operating lease due to our default under the
operating lease.
Termination Upon Event of Default. If an event of default occurs and continues beyond any applicable notice and cure
periods set forth in the hotel management agreement, the non-defaulting party generally has, among other remedies, the option
of terminating the applicable hotel management agreement upon written notice to the defaulting party.
Performance Termination. Each of the management agreements with Hilton (or its affiliates) provide us with a right to
terminate the hotel management agreement without the payment of a termination fee if the manager fails to achieve certain
criteria relating to the performance of the applicable hotel. The performance period is measured with respect to any two
consecutive fiscal years. The performance criteria are: (i) the hotel’s operating cash flow (before deducting our priority return)
does not equal or exceed 85% of our priority return (as defined in the hotel management agreement); and (ii) the hotel’s yield
index is below the base yield index (as such terms are defined in the hotel management agreement), which is 90%. The manager
has a right to avoid a performance termination by paying to us an amount within 30 days of due notice equal to the deficiency
set forth in (i) above to cure such performance default, but in no event may the manager exercise such cure with respect to more
than four full operating years during the initial term or with respect to more than four full operating years during any single
extension term. The amount of any shortfall payable by manager to us shall be reduced to the extent of any portion attributable
to a force majeure event, performance of certain capital renewals and major capital improvements adversely affecting a material
portion of the income generating areas of the hotel, or certain uncontrollable expenses that could not have been reasonably
anticipated by the manager.
Early Termination for Casualty. In the event the applicable hotel is substantially damaged by fire or other casualty such
that it cannot be restored within 240 days, or in the event our lender doesn’t provide adequate insurance proceeds to restore the
hotel, we may terminate the hotel management agreement. If we undertake to restore the hotel or if we are required to restore
the hotel because it was not substantially damaged and fail to commence such repairs within 60 days of receiving sufficient
insurance proceeds to complete such work, or fail to complete such repairs within 240 days of the casualty, the manager may
terminate the agreement. We have no obligation to restore the premises, however, if the casualty occurs in the last five years of
the third renewal term or thereafter.
Early Termination for Condemnation. If all or substantially all of the applicable hotel is taken in any condemnation or
similar proceeding which, in our reasonable opinion, makes it infeasible to restore or continue to operate the hotel in accordance
with the hotel management agreement, the hotel management agreement shall terminate. If it is reasonably feasible to restore
the premises and operate the hotel and we fail to complete the restoration within two years of the taking, the manager may
terminate the agreement. We have no obligation to restore the premises, however, if the taking occurs in the last five years of
the third renewal term or thereafter.
Assignment and Sale. Each management agreement with Hilton (or its affiliates) provides that we cannot sell the
applicable hotel to any unrelated third party, which includes the transfer of an equity interest, or engage in certain change of
32
control actions (i) if such party has an ownership interest, either directly or indirectly, in a brand of hotels totaling at least 10
hotels and such brand competes with the manager or any affiliate thereof; (ii) if such party is known to be of ill repute or an
unsuitable business associate (per gaming industry regulations where the manager holds a gaming license); (iii) if such party
does not have the ability to fulfill our financial obligations under the hotel management agreement; or (iv) if certain conditions
are not satisfied, including cure of any existing or potential defaults, receipt of evidence of proper insurance coverage, payment
of fees and expenses which will accrue to the manager through the date of closing, and provision of sufficient notice of the
contemplated sale to the manager.
Right of First Offer. Each of the management agreements with Hilton (or its affiliates) provides the manager with a right
of first negotiation with respect to a sale of the hotel (which includes any equity transfer, whether directly or indirectly) or lease
of the hotel (if applicable). After notice of a proposed sale or lease to the manager, the manager has 30 days to elect or decline
to exercise its right to purchase or lease. If the manager makes an election to purchase or lease, the parties have 30 days to
execute an agreement for purchase (or lease, if applicable) and an additional 30 days to consummate the purchase or lease (if
applicable). If the manager declines to exercise its right to purchase or lease, the sale or lease must occur within 180 days at
greater than 90% of the price or the notice of sale must be renewed to manager.
Accor Management Agreement
In connection with our acquisition of the Sofitel Chicago Magnificent Mile, our TRS lessee, as lessee of the hotel, assumed
a management agreement (as amended, the “Accor management agreement”) with Accor that allows us to operate under the
Sofitel brand name and utilize Accor’s services and experience in connection with the management and operation of the Sofitel
Chicago Magnificent Mile. The material terms of the Accor management agreement are summarized as follows:
Term. The initial term of the management agreement expires on December 31, 2030 and automatically renews for three
consecutive 10-year renewal terms, unless the manager terminates the agreement by written notice at least 180 days prior to the
expiration of the then-current term.
Events of Default. An “Event of Default” is generally defined to include the failure to make a payment under the Accor
management agreement and failure to cure such non-payment after the applicable notice and cure period, the bankruptcy or
insolvency of either party, a failure by either party to maintain at all times all of the insurance required to be maintained by such
party and failure to cure such default after the applicable notice and cure period, the failure by either party to perform any of the
material covenants in the Accor management agreement which continues beyond the applicable notice and cure period and a
transfer of the Accor management agreement by either party in violation of the provisions of the Accor management agreement.
The occurrence of an Event of Default prevents the defaulting party from transferring the Accor management agreement
without the consent of the non-defaulting party.
Termination. A non-defaulting party may terminate the Accor management agreement if the defaulting party (i) has
breached any material representation or fails to perform any material provision of the Accor management agreement or (ii)
becomes insolvent or bankrupt, in each case after the expiration of any applicable notice and cure period. In addition, the
manager may terminate the Accor management agreement if we default under a mortgage relating to the hotel and fail to cure
such default within the times provided.
Performance Termination. We have the right to terminate the Accor management agreement without the payment of a
termination fee if the manager fails to achieve certain criteria relating to the performance of the hotel managed by Accor. The
performance period is measured with respect to any two consecutive operating years. The performance criteria are: (i) the
RevPAR for the hotel is less than 90% of the RevPAR for the hotel’s competitive set for each such operating year and (ii) the
adjusted net operating income (meaning the net operating income less the hurdle amount of approximately $10.2 million plus
8% of any amounts we spent on capital expenditures) is a negative number (i.e. less than zero) for each such operating year,
provided that for any operating year in which the operation of the hotel is materially and adversely affected by a force majeure
event, a refurbishing program or major capital improvements, the RevPAR for the hotel and the adjusted net operating income
for such operating years shall be adjusted equitably. The manager will have a right up to three times in any eight-year period to
avoid a performance termination by paying to us a cure amount that equals, for any operating year, the lower of (i) the amount
by which the adjusted net operating income is less than zero and (ii) the amount that we would have been entitled to receive as a
distribution from the hotel had the hotel not had a RevPAR shortfall.
Early Termination for Condemnation. If all of the hotel, or a portion of the hotel that in our reasonable opinion makes it
imprudent or unsuitable to use and operate the remaining portion of the hotel in accordance with the standards maintained by
the Sofitel brand, is taken in any condemnation or similar proceeding, we may terminate the Accor management agreement.
33
Early Termination for Casualty. If a material part of the hotel is damaged or destroyed by fire or other casualty, then we
may terminate the Accor management agreement and elect not to restore the hotel. If we elect to restore the hotel, we must
commence such process within 120 days after the date of the casualty and diligently proceed with the restoration of the hotel so
that it meets the standards maintained by the Sofitel brand. If we fail to complete the restoration within two years after the date
of the casualty, then for so long as such failure continues, the manager may terminate the Accor management agreement. If we
or the manager terminate the management agreement because of a casualty, or if we have not restored the hotel and desire to
lease or sell it, we must first offer to sell the hotel to the manager. If we repair, rebuild or replace the premises within five years,
the manager may reinstate the Accor management agreement.
Assignment and Sale. So long as we are not in default under the Accor management agreement and any advances made by
the manager on our behalf would be repaid in connection with the sale, we may sell the Sofitel Chicago Magnificent Mile and
assign the Accor management agreement (including as a result of a change of control) without the consent of the manager to
any of our affiliates or to any person that (i) is not a competitor of the manager (as defined in the Accor management
agreement), (ii) is not generally recognized in the community as being a person of ill repute or with whom a prudent business
person would not wish to associate in a commercial venture, and (iii) has a minimum net worth required by the Accor
management agreement, if the assignee expressly assumes the Accor management agreement.
For recent developments regarding the Accor management agreement, see “Item 3. Legal Proceedings.”
Park Hyatt Beaver Creek Resort & Spa Management Agreement
Term. The term of the Park Hyatt Beaver Creek Resort & Spa management agreement was 30 years, expiring
December 31, 2019. This management agreement has been extended through December 31, 2029, and has one 10-year
extension option remaining, at the discretion of the manager.
Events of Default. An “Event of Default” under the Park Hyatt Beaver Creek Resort & Spa hotel management agreement
is generally defined to include the failure to make a payment under the hotel management agreement and failure to cure such
non-payment after due notice and a breach by either party of any other covenants or obligations in the hotel management
agreement which continues beyond the applicable notice and grace period.
Termination Upon Event of Default. If an event of default occurs and continues beyond any applicable notice and cure
periods set forth in the hotel management agreement, the non-defaulting party generally has, among other remedies, the option
of terminating the applicable hotel management agreement upon 15 days’ written notice to the defaulting party.
Early Termination for Casualty. In the event the applicable hotel is substantially damaged by fire or other casualty, and if,
in connection with any casualty, the cost of restoring the hotel equals or exceeds 25% of the replacement cost of the hotel in the
case that the casualty is covered by insurance, or 10% of the replacement cost of the hotel in the case that the casualty is not
covered by insurance, then we may elect, by providing notice to Hyatt within 90 days of the occurrence of the casualty to not
restore the hotel and to terminate the agreement.
Early Termination for Eminent Domain. If all or substantially all of the hotel is taken in any eminent domain procedure
so as to render the hotel untenantable, we have the right to terminate the agreement upon 90 days’ prior written notice to Hyatt.
Assignment and Sale. The agreement provides that we cannot sell or assign our interest in the hotel without the prior
approval of Hyatt, which shall not be unreasonably withheld. Hyatt’s approval of a sale or assignment is based on the following
factors: (i) the ability of the prospective assignee to fulfill the financial obligations of the owner of the hotel; (ii) the integrity
and business reputation of the prospective assignee; and (iii) any potential conflicts of interest which may arise in connection
with the assignment. Pursuant to the agreement, an assignment is deemed to have occurred if more than 40% of the beneficial
ownership of the owner of the hotel is transferred.
Remington Hotels Master Hotel Management Agreement
General. In 2013, we entered into a master hotel management agreement with Remington Lodging governing the terms of
Remington Lodging’s provision of hotel management services and design and construction services with respect to hotels
owned or leased by us. In connection with Ashford Inc.’s acquisition of Premier from Remington Lodging in August 2018, we
amended and restated the original master hotel management agreement to provide only for hotel management services to be
provided to our TRS lessees by Remington Lodging by entering into the Amended and Restated Hotel Master Management
Agreement dated as of August 8, 2018, which agreement we refer to below as the “master hotel management agreement.” In
connection with Ashford Inc.’s acquisition of the hotel management business of Remington Lodging on November 6, 2019,
Remington Hotels became a subsidiary of Ashford Inc., and the master hotel management agreement between Remington
Hotels and us remains in effect. Pursuant to the master hotel management agreement, Remington Hotels currently manages the
34
Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and Mr. C Beverly Hills Hotel. The master hotel
management agreement will also govern the management of hotels we acquire in the future that are managed by Remington
Hotels, which has the right to manage and operate hotel properties we acquire in the future unless our independent directors
either (i) unanimously elect not to engage Remington Hotels, or (ii) by a majority vote, elect not to engage Remington Hotels
because they have determined, in their reasonable business judgment, (A) special circumstances exist such that it would be in
our best interest not to engage Remington Hotels for the particular hotel, or (B) based on the prior performance of Remington
Hotels, another manager or developer could perform the management duties materially better than Remington Lodging for the
particular hotel. See “Certain Agreements—Mutual Exclusivity Agreements—Remington Hotels Hotel Management MEA—
Exclusivity Rights of Remington Hotels.” Prior to its acquisition by Ashford Inc. on November 6, 2019, Remington Lodging
was owned 100% by Mr. Monty J. Bennett, chairman of our board of directors and the chairman, chief executive officer and
significant stockholder of Ashford Inc. and Mr. Archie Bennett, Jr.
Term. The master hotel management agreement provides for an initial term of 10 years as to each hotel governed by the
agreement. The term may be renewed by Remington Hotels, at its option, subject to certain performance tests, for three
successive periods of seven years each and, thereafter, a final term of four years, provided that at the time the option to renew is
exercised, Remington Hotels is not then in default under the master hotel management agreement. If at the time of the exercise
of any renewal period, Remington Hotels is in default, then the exercise of the renewal option will be conditional on timely cure
of such default, and if such default is not timely cured, then our TRS lessee may terminate the master hotel management
agreement regardless of the exercise of such option and without the payment of any fee or liquidated damages. If Remington
Hotels desires to exercise any option to renew, it must give our TRS lessee written notice of its election to renew the master
hotel management agreement no less than 90 days before the expiration of the then current term of the master hotel
management agreement.
Amounts Payable under the Master Hotel Management Agreement. Remington Hotels receives a base management fee,
and if the hotels meet and exceed certain thresholds, an additional incentive fee. The base management fee for each hotel will
be due monthly and will be equal to the greater of:
•
•
$15,045 (increased annually based on consumer price index adjustments); or
3% of the gross revenues associated with that hotel for the related month.
The incentive management fee, if any, for each hotel will be due annually in arrears within 90 days of the end of the fiscal
year and will be equal to the lesser of (i) 1% of gross revenues and (ii) the amount by which the actual house profit (gross
operating profit of the applicable hotel before deducting management fees or franchise fees) exceeds the target house profit as
set forth in the annual operating budget approved for the applicable fiscal year, except with respect to hotels where Remington
Hotels takes over management upon our acquisition, in which case, for the first five years, the incentive management fee to be
paid to Remington Hotels, if any, is the amount by which the hotel’s actual house profit exceeds the projected house profit for
such calendar year as set forth in our acquisition pro forma. If, however, based on actual operations and revised forecasts from
time to time, it is reasonably anticipated that the incentive fee is reasonably expected to be earned, the TRS lessee will consider
payment of the incentive fee pro rata on a quarterly basis.
The incentive fee is designed to encourage Remington Hotels to generate higher house profit at each hotel by increasing the
fee due to Remington Hotels when the hotels generate house profit above certain threshold levels. Any increased revenues will
generate increased lease payments under the percentage leases and should thereby benefit our stockholders.
Termination. The master hotel management agreement may be terminated as to one or more of the hotels earlier than the
stated term if certain events occur, including:
•
•
•
•
•
a sale of a hotel;
the failure of Remington Hotels to satisfy certain performance standards;
for the convenience of our TRS lessee;
in the event of a casualty to, condemnation of, or force majeure involving a hotel; or
upon a default by Remington Hotels or us that is not cured prior to the expiration of any applicable cure periods.
In certain cases of early termination of the master hotel management agreement with respect to one or more of the hotels,
we must pay Remington Hotels termination fees, plus any amounts otherwise due to Remington Hotels pursuant to the terms of
the master hotel management agreement. We will be obligated to pay termination fees in the circumstances described below,
provided that Remington Hotels is not then in default, subject to certain cure and grace periods:
•
Sale. If any hotel subject to the master hotel management agreement is sold during the first 12 months of the date such
hotel becomes subject to the master hotel management agreement, our TRS lessee may terminate the master hotel
management agreement with respect to such sold hotel, provided that it pays to Remington Hotels an amount equal to
35
the management fee (both base fees and incentive fees) estimated to be payable to Remington Hotels with respect to
the applicable hotel pursuant to the then-current annual operating budget for the balance of the first year of the term. If
any hotel subject to the master hotel management agreement is sold at any time after the first year of the term and the
TRS lessee terminates the master hotel management agreement with respect to such hotel, our TRS lessee will have no
obligation to pay any termination fees.
• Casualty. If any hotel subject to the master hotel management agreement is the subject of a casualty during the first
year of the initial 10-year term and the TRS lessee elects not to rebuild, then we must pay to Remington Hotels the
termination fee, if any, that would be owed if the hotel had been sold. However, after the first year of the initial 10-
year term, if a hotel is the subject of a casualty and the TRS lessee elects not to rebuild the hotel even though sufficient
casualty insurance proceeds are available to do so, then the TRS lessee must pay to Remington Hotels a termination
fee equal to the product obtained by multiplying (i) 65% of the aggregate management fees (both base fees and
incentive fees) estimated to be paid to Remington Hotels with respect to the applicable hotel pursuant to the then-
current annual operating budget (but in no event less than the management fees for the preceding full fiscal year) by
(ii) nine.
• Condemnation or Force Majeure. In the event of a condemnation of, or the occurrence of any force majeure event with
respect to, any of the hotels, the TRS lessee has no obligation to pay any termination fees if the master hotel
management agreement terminates as to those hotels.
• Failure to Satisfy Performance Test. If any hotel subject to the master hotel management agreement fails to satisfy a
certain performance test, the TRS lessee may terminate the master hotel management agreement with respect to such
hotel, and in such case, the TRS lessee must pay to Remington Hotels an amount equal to 60% of the product obtained
by multiplying (i) 65% of the aggregate management fees (both base fees and incentive fees) estimated to be paid to
Remington Hotels with respect to the applicable hotel pursuant to the then-current annual operating budget (but in no
event less than the management fees for the preceding full fiscal year) by (ii) nine. Remington Hotels will have failed
the performance test with respect to a particular hotel if during any fiscal year during the term (i) such hotel’s gross
operating profit margin for such fiscal year is less than 75% of the average gross operating profit margins of
comparable hotels in similar markets and geographical locations, as reasonably determined by Remington Hotels and
the TRS lessee, and (ii) such hotel’s RevPAR yield penetration is less than 80%. Upon a performance test failure, the
TRS lessee must give Remington Hotels two years to cure. If, after the first year, the performance test failure has not
been cured, then the TRS lessee may, in order not to waive any such failure, require Remington Hotels to engage a
consultant with significant hotel lodging experience reasonably acceptable to both Remington Hotels and the TRS
lessee, to make a determination as to whether or not another management company could manage the hotel in a
materially more efficient manner. If the consultant’s determination is in the affirmative, then Remington Hotels must
engage such consultant to assist with the cure of such performance failure for the second year of the cure period after
that failure. If the consultant’s determination is in the negative, then Remington Hotels will be deemed not to be in
default under the performance test. The cost of such consultant will be shared by the TRS lessee and Remington Hotels
equally. If Remington Hotels fails the performance test for the second year of the cure period and, after that failure, the
consultant again makes a finding that another management company could manage the hotel in a materially more
efficient manner than Remington Hotels, then the TRS lessee has the right to terminate the management agreement
with respect to such hotel upon 45 days’ written notice to Remington Hotels and to pay to Remington Hotels the
termination fee described above. Further, if any hotel subject to the Remington Hotels master hotel management
agreement is within a cure period due to a failure of the performance test, an exercise of a renewal option shall be
conditioned upon timely cure of the performance test failure, and if the performance failure is not timely cured, the
TRS lessee may elect to terminate the management agreement without paying any termination fee.
• For Convenience. With respect to any hotel managed by Remington Hotels pursuant to the master hotel management
agreement, if the TRS lessee elects for convenience to terminate the management of such hotel, at any time, including
during any renewal term, the TRS lessee must pay a termination fee to Remington Hotels, equal to the product of
(i) 65% of the aggregate management fees for such hotel (both base fees and incentive fees) estimated to be payable to
Remington Hotels with respect to the applicable hotel pursuant to the then-current annual operating budget (but in no
event less than the management fees for the preceding full fiscal year) and (ii) nine.
If the master hotel management agreement terminates as to all of the hotels covered in connection with a default under the
master hotel management agreement, the hotel management MEA can also be terminated at the non-defaulting party’s election.
See “Certain Agreements—Mutual Exclusivity Agreements—Remington Hotels Hotel Management MEA.”
Maintenance and Modifications. Remington Hotels must maintain each hotel in good repair and condition and make such
routine maintenance, repairs and minor alterations as it deems reasonably necessary. The cost of all such routine maintenance,
repairs and alterations will be paid by the TRS lessee. All non-routine repairs and maintenance, either to a hotel or its fixtures,
36
furniture and equipment pursuant to the capital improvement budget described below, will be managed by Premier pursuant to
the master project management agreement.
Insurance. Remington Hotels must coordinate with the TRS lessee the procurement and maintenance of all workers’
compensation, employer’s liability, and other appropriate and customary insurance related to its operations as a property
manager, the cost of which is the responsibility of the TRS lessee.
Assignment and Subleasing. Neither Remington Hotels nor the TRS lessee may assign or transfer the master hotel
management agreement without the other party’s prior written consent. However, Remington Hotels may assign its rights and
obligations to an affiliate that satisfies the eligible independent contractor requirements and is “controlled” by Mr. Monty J.
Bennett, Mr. Archie Bennett, Jr., or their respective family partnerships or trusts, the sole members or beneficiaries of which are
at all times lineal descendants of Messrs. Monty or Archie Bennett, Jr. (including step children) and spouses. “Controlled”
means (i) the possession of a majority of the capital stock (or ownership interest) and voting power of such affiliate, directly or
indirectly, or (ii) the power to direct or cause the direction of the management and policies of such affiliate in the capacity of
chief executive officer, president, chairman, or other similar capacity where they are actively engaged or involved in providing
such direction or control and spend a substantial amount of time managing such affiliate. No assignment will release Remington
Hotels from any of its obligations under the master hotel management agreement.
Damage to Hotels. If any of our insured properties is destroyed or damaged, the TRS lessee is obligated, subject to the
requirements of the underlying lease, to repair or replace the damaged or destroyed portion of the hotel to the same condition as
existed prior to such damage or destruction. If the lease relating to such damaged hotel is terminated pursuant to the terms of the
lease, the TRS lessee has the right to terminate the master hotel management agreement with respect to such damaged hotel
upon 60 days’ written notice. In the event of a termination, neither the TRS lessee nor Remington Hotels will have any further
liabilities or obligations under the master hotel management agreement with respect to such damaged hotel, except that we may
be obligated to pay to Remington Hotels a termination fee, as described above. If the hotel management agreement remains in
effect with respect to such damaged hotel, and the damage does not result in a reduction of gross revenues at the hotel, the TRS
lessee’s obligation to pay management fees will be unabated. If, however, the master hotel management agreement remains in
effect with respect to such damaged hotel, but the damage does result in a reduction of gross revenues at the hotel, the TRS
lessee will be entitled to partial, pro rata abatement of the management fees while the hotel is being repaired.
Condemnation of a Property or Force Majeure. If all or substantially all of a hotel is subject to a total condemnation or a
partial taking that prevents use of the property as a hotel, the master hotel management agreement, with respect to such hotel,
will terminate, subject to the requirements of the applicable lease. In the event of termination, neither the TRS lessee nor
Remington Hotels will have any further rights, remedies, liabilities or obligations under the master hotel management
agreement with respect to such hotel. If any partial taking of a property does not make it unreasonable to continue to operate the
hotel, there is no right to terminate the master hotel management agreement. If there is an event of force majeure or any other
cause beyond the control of Remington Hotels that directly involves a hotel and has a significant adverse effect upon the
continued operations of that hotel, then the master hotel management agreement may be terminated by the TRS lessee. In the
event of such a termination, neither the TRS lessee nor Remington Hotels will have any further rights, remedies, liabilities or
obligations under the master hotel management agreement with respect to such hotel.
Annual Operating Budget. The master hotel management agreement provides that not less than 45 days prior to the
beginning of each fiscal year during the term of the master hotel management agreement, Remington Hotels will submit to the
TRS lessee for each of the hotels, an annual operating budget setting forth in detail an estimated profit and loss statement for
each of the next 12 months (or for the balance of the fiscal year in the event of a partial first fiscal year), including a schedule of
hotel room rentals and other rentals and a marketing and business plan for each of the hotels. The budget is subject to the TRS
lessee approval, which may not be unreasonably withheld. The budget may be revised from time to time, taking into account
such circumstances as the TRS lessee deems appropriate or as business and operating conditions shall demand, subject to the
reasonable approval of Remington Hotels.
Capital Improvement Budget. Premier must prepare a capital improvement budget of the expenditures necessary for
replacement of FF&E and building repairs for the hotels during the following fiscal year and provide such budget to the
relevant TRS lessee and landlord for approval at the same time Remington Hotels submits the proposed annual operating
budget for approval by TRS lessee. Remington Hotels may not make any other expenditures for these items without the relevant
TRS lessee and landlord approval, except expenditures which are provided in the capital improvements budget or are required
by reason of any (i) emergency, (ii) applicable legal requirements, (iii) the terms of any franchise agreement or (iv) are
otherwise required for the continued safe and orderly operation of our hotels.
Indemnity Provisions. Remington Hotels has agreed to indemnify the TRS lessee against all damages not covered by
insurance that arise from: (i) the fraud, willful misconduct or gross negligence of Remington Hotels subject to certain
37
limitations; (ii) infringement by Remington Hotels of any third party’s intellectual property rights; (iii) employee claims based
on a substantial violation by Remington Hotels of employment laws or that are a direct result of the corporate policies of
Remington Hotels; (iv) the knowing or reckless placing, discharge, leakage, use or storage of hazardous materials in violation
of applicable environmental laws on or in any of our hotels by Remington Hotels; or (v) the breach by Remington Hotels of the
master hotel management agreement, including action taken by Remington Hotels beyond the scope of its authority under the
master hotel management agreement, which is not cured.
Except to the extent indemnified by Remington Hotels as described in the preceding paragraph, the TRS lessee will
indemnify Remington Hotels against all damages not covered by insurance and that arise from: (i) the performance of
Remington Hotels’ services under the master hotel management agreement; (ii) the condition or use of our hotels; (iii) certain
liabilities to which Remington Hotels is subjected, including pursuant to the WARN Act, in connection with the termination of
the master hotel management agreement; (iv) all employee cost and expenses; or (v) any claims made by an employee of
Remington Hotels against Remington Hotels that are based on a violation or alleged violation of the employment laws.
Events of Default. Events of default under the master hotel management agreement include:
•
•
•
•
The TRS lessee or Remington Hotels files a voluntary bankruptcy petition, or experiences a bankruptcy-related event
not discharged within 90 days.
The TRS lessee or Remington Hotels fails to make any payment due under the master hotel management agreement,
subject to a 10-day notice and cure period.
The TRS lessee or Remington Hotels fails to observe or perform any other term of the master hotel management
agreement, subject to a 30-day notice and cure period. There are certain instances in which the 30-day notice and cure
period can be extended to up to 120 days.
Remington Hotels does not qualify as an “eligible independent contractor” as such term is defined in Section 856(d)(9)
of the Code.
If an event of default occurs and continues beyond any grace period, the non-defaulting party will have the option of
terminating the master hotel management agreement, on 30 days’ notice to the other party.
To minimize conflicts between us and Remington Hotels on matters arising under the master hotel management agreement,
the Company’s Corporate Governance Guidelines provide that any waiver, consent, approval, modification, enforcement
matters or elections which the Company may make pursuant to the terms of the master hotel management agreement shall be
within the exclusive discretion and control of a majority of the independent members of the board of directors (or higher vote
thresholds specifically set forth in such agreements). In addition, our board of directors has established a Related Party
Transactions Committee comprised solely of independent members of our board of directors to review all related party
transactions that involve conflicts. The Related Party Transactions Committee may make recommendations to the independent
members of our board of directors (including rejection of any proposed transaction). All related party transactions are approved
by either the Related Party Transactions Committee or the independent members of our board of directors.
Premier Master Project Management Agreement
General. In 2013, we entered into a master hotel management agreement with Remington Lodging governing the terms of
Remington Lodging’s provision of hotel management services and design and construction services with respect to hotels
owned or leased by us. In connection with Ashford Inc.’s acquisition of Premier from Remington Lodging in August 2018,
Braemar OP, our TRSs and Premier entered into an agreement for design and construction services to be provided to us by
Premier, solely in order to effect the transfer of the design and construction business to Premier, by entering into the Master
Project Management Agreement dated as of August 8, 2018, which agreement we refer to below as the “master project
management agreement.” Pursuant to the master project management agreement, Premier currently provides design and
construction services to all of our hotels. The master project management agreement will also govern the provision of design
and construction services to hotels we acquire in the future, as Premier has the right to provide design and construction services
to hotel properties we acquire in the future, to the extent we have the right and/or control the right to direct the development and
construction of and/or capital improvements to or refurbishment of, such hotels, unless our independent directors either
(i) unanimously elect not to engage Premier, or (ii) by a majority vote, elect not to engage Premier because they have
determined, in their reasonable business judgment, (A) special circumstances exist such that it would be in our best interest not
to engage Premier for the particular hotel, or (B) based on the prior performance of Premier, another manager or developer
could perform the project management, project related services or development duties materially better than Premier for the
particular hotel. See “Certain Agreements—Mutual Exclusivity Agreements—Premier Project Management MEA—Exclusivity
Rights of Premier.”
38
Term. The master project management agreement provides for an initial term of 10 years as to each hotel governed by the
agreement; provided that the initial term of the master project agreement with respect to hotels owned or leased by us as of the
date of the master project management agreement shall be until January 17, 2029. The term may be renewed by Premier, at its
option, for three successive periods of seven years each and, thereafter, a final term of four years, provided that at the time the
option to renew is exercised, Premier is not then in default under the master project management agreement. If at the time of the
exercise of any renewal period, Premier is in default, then the exercise of the renewal option will be conditional on timely cure
of such default, and if such default is not timely cured, then our TRS lessee may terminate the master project management
agreement regardless of the exercise of such option and without the payment of any fee or liquidated damages. If Premier
desires to exercise any option to renew, it must give our TRS lessee written notice of its election to renew the master project
management agreement no less than 90 days before the expiration of the then-current term of the master project management
agreement.
Amounts Payable under the Master Project Management Agreement. The master project management agreement
provides that the TRS lessee will pay Premier a design and construction fee equal to 4% of the total project costs associated
with the implementation of the approved capital improvement budget for a hotel until such time that the capital improvement
budget and/or renovation project costs involve expenditures in excess of 5% of gross revenues of such hotel, whereupon the
design and construction fee will be 3% of total project costs in excess of the 5% of gross revenue threshold. In addition, the
TRS lessee will pay Premier additional fees as follows:
•
•
•
•
architecture - 6.5% of total construction costs;
construction management - 10.0% of total construction costs (for projects without a general contractor);
interior design - 6.0% of the amount selected (including the cost of any and all items selected by Premier or which are
specified in the general contractor’s scope of work but excluding any associated charges for labor, freight and tax); and
FF&E purchasing - 8.0% of the purchased amount (which includes the selected items, freight and tax) unless the total
purchased amount for a single hotel property in a single year is greater than $2.0 million, in which case the fee is
reduced to 6.0% of the purchased amount in excess of $2 million.
Termination. The master project management agreement may be terminated as to one or more of the hotels earlier than the
stated term if certain events occur, including:
•
•
•
•
a sale of a hotel;
for the convenience of our TRS lessee;
in the event of a casualty to, condemnation of, or force majeure involving a hotel; or
upon a default by Premier or us that is not cured prior to the expiration of any applicable cure periods.
In certain cases of early termination of the master project management agreement with respect to one or more of the hotels,
we must pay Premier termination fees, plus any amounts otherwise due to Premier pursuant to the terms of the master project
management agreement. We will be obligated to pay termination fees in the circumstances described below, provided that
Premier is not then in default, subject to certain cure and grace periods:
•
•
•
Sale. If any hotel subject to the master project management agreement is sold, our TRS lessee may terminate the
master project management agreement with respect to such sold hotel, and our TRS lessee will have no obligation to
pay any termination fees.
Casualty, Condemnation or Force Majeure. In the event of a casualty with respect to, condemnation of, or the
occurrence of any force majeure event with respect to, any of the hotels, the TRS lessee has no obligation to pay any
termination fees if the master project management agreement terminates as to those hotels.
For Convenience. With respect to any hotel project-managed by Premier pursuant to the master project management
agreement, if the TRS lessee elects for convenience to terminate the project management of such hotel, at any time,
including during any renewal term, the TRS lessee must pay a termination fee to Premier, equal to the product of
(i) 65% of the aggregate design and construction fees and market service fees for such hotel estimated to be payable to
Premier with respect to the applicable hotel for the full current fiscal year in which such termination is to occur (but in
no event less than the design and construction fees and market service fees for the preceding full fiscal year) and
(ii) nine.
Implementation of Capital Improvement Budget. Premier, on behalf of TRS lessee, shall cause to be made non-routine
repairs and other work, either to the hotel’s building or its FF&E, pursuant to the capital improvement budget prepared by
Premier pursuant to the master project management agreement and approved by TRS lessee.
39
Insurance. Premier must coordinate with the TRS lessee the procurement and maintenance of all general compensation,
employer’s liability, and other appropriate and customary insurance related to its operations as a project manager, the cost of
which is the responsibility of the TRS lessee.
Assignment and Subleasing. Neither Premier nor the TRS lessee may assign or transfer the master project management
agreement without the other party’s prior written consent. However, Premier may assign its rights and obligations to any entity
that is “controlled” by Mr. Monty J. Bennett, Mr. Archie Bennett, Jr., or their respective family partnerships or trusts, the sole
members or beneficiaries of which are at all times lineal descendants of Messrs. Monty or Archie Bennett, Jr. (including step
children) and spouses. “Controlled” means (i) the possession of a majority of the capital stock (or ownership interest) and
voting power of such affiliate, directly or indirectly, or (ii) the power to direct or cause the direction of the management and
policies of such affiliate in the capacity of chief executive officer, president, chairman, or other similar capacity where they are
actively engaged or involved in providing such direction or control and spend a substantial amount of time managing such
affiliate. No assignment will release Premier from any of its obligations under the master project management agreement.
Damage to Hotels. If any of our insured properties is destroyed or damaged, the TRS lessee is obligated, subject to the
requirements of the underlying lease, to repair or replace the damaged or destroyed portion of the hotel to the same condition as
existed prior to such damage or destruction. If the lease relating to such damaged hotel is terminated pursuant to the terms of the
lease, the TRS lessee has the right to terminate the master project management agreement with respect to such damaged hotel
upon 60 days’ written notice. In the event of a termination, neither the TRS lessee nor Premier will have any further liabilities
or obligations under the master project management agreement with respect to such damaged hotel.
Condemnation of a Property or Force Majeure. If all or substantially all of a hotel is subject to a total condemnation or a
partial taking that prevents use of the property as a hotel, the master project management agreement, with respect to such hotel,
will terminate, subject to the requirements of the applicable lease. In the event of termination, neither the TRS lessee nor
Premier will have any further rights, remedies, liabilities or obligations under the master project management agreement with
respect to such hotel. If any partial taking of a property does not make it unreasonable to continue to operate the hotel, there is
no right to terminate the master project management agreement. If there is an event of force majeure or any other cause beyond
the control of Premier that directly involves a hotel and has a significant adverse effect upon the continued operations of that
hotel, then the master project management agreement may be terminated by the TRS lessee. In the event of such a termination,
neither the TRS lessee nor Premier will have any further rights, remedies, liabilities or obligations under the master project
management agreement with respect to such hotel.
Indemnity Provisions. Premier has agreed to indemnify the TRS lessee against all damages not covered by insurance that
arise from: (i) the fraud, willful misconduct or gross negligence of Premier; (ii) infringement by Premier of any third party’s
intellectual property rights; (iii) the knowing or reckless placing, discharge, leakage, use or storage of hazardous materials in
violation of applicable environmental laws on or in any of our hotels by Premier; or (iv) the breach by Premier of the master
project management agreement, including action taken by Premier beyond the scope of its authority under the master project
management agreement, which is not cured.
Except to the extent indemnified by Premier as described in the preceding paragraph, the TRS lessee will indemnify
Premier against all damages not covered by insurance and that arise from: (i) the performance of Premier’s services under the
master project management agreement; or (ii) the condition or use of our hotels.
Events of Default. Events of default under the master project management agreement include:
•
•
•
The TRS lessee or Premier files a voluntary bankruptcy petition, or experiences a bankruptcy-related event not
discharged within 90 days.
The TRS lessee or Premier fails to make any payment due under the master project management agreement, subject to
a 10-day notice and cure period.
The TRS lessee or Premier fails to observe or perform any other term of the master project management agreement,
subject to a 30-day notice and cure period. There are certain instances in which the 30-day notice and cure period can
be extended to up to 120 days.
If an event of default occurs and continues beyond any grace period, the non-defaulting party will have the option of
terminating the master project management agreement, on 30 days’ notice to the other party.
To minimize conflicts between us and Premier on matters arising under the master project management agreement, the
Company’s Corporate Governance Guidelines provide that any waiver, consent, approval, modification, enforcement matters or
elections which the Company may make pursuant to the terms of the master project management agreement shall be within the
exclusive discretion and control of a majority of the independent members of the board of directors (or higher vote thresholds
40
specifically set forth in such agreements). In addition, our board of directors has established a Related Party Transactions
Committee comprised solely of independent members of our board of directors to review all related party transactions that
involve conflicts. The Related Party Transactions Committee may make recommendations to the independent members of our
board of directors (including rejection of any proposed transaction). All related party transactions are approved by either the
Related Party Transactions Committee or the independent members of our board of directors.
Mutual Exclusivity Agreements
Remington Hotels Hotel Management MEA
General. In 2013, we entered into a mutual exclusivity agreement with Remington Lodging. Remington Lodging gave us a
first right of refusal to purchase any lodging-related investments identified by Remington Lodging and any of its affiliates that
met our initial investment criteria, and we agreed to engage Remington Lodging to provide hotel management, project
management and development services for hotels we acquired or invested in, to the extent that we had the right or controlled the
right to direct such matters, subject to certain conditions. In connection with Ashford Inc.’s acquisition of Premier from
Remington Lodging in August 2018, we amended and restated the original mutual exclusivity agreement to provide that
Remington Lodging gave us a first right of refusal to purchase any lodging-related investments identified by Remington
Lodging and any of its affiliates that met our initial investment criteria, and we agreed to engage Remington Lodging to provide
hotel management for hotels we acquired or invested in, to the extent that we had the right or controlled the right to direct such
matters. As a result, concurrently with Ashford Inc.’s acquisition of Premier, we, Braemar OP and Remington Lodging entered
into the Amended and Restated Mutual Exclusivity Agreement dated as of August 8, 2018, which agreement we refer to below
as the “hotel management MEA.” In connection with Ashford Inc.’s acquisition of the hotel management business of
Remington Lodging on November 6, 2019, Remington Hotels became a subsidiary of Ashford Inc., and the mutual exclusivity
agreement between Remington Hotels and us remains in effect.
Term. The initial term of the hotel management MEA is 10 years from November 19, 2013. This term automatically
extends for three additional renewal periods of seven years each and a final renewal period of four years, for a total of up to 35
years. The agreement may be sooner terminated because of:
•
•
•
an event of default (see “Events of Default”),
a party’s early termination rights (see “Early Termination”), or
a termination of all our master hotel management agreement between TRS lessee and Remington Hotels because of an
event of default under the master hotel management agreement that affects all properties (see “Relationship with
Master Hotel Management Agreement”).
Modification of Investment Guidelines. In the event that we materially modify our initial investment guidelines without
the written consent of Remington Hotels, which consent may be withheld at its sole and absolute discretion, and may further be
subject to the consent of Ashford Trust parties, the Remington Hotels parties will have no obligation to present or offer us
investment opportunities at any time thereafter. Instead, the Remington Hotels parties, subject to the superior rights of the
Ashford Trust parties or any other party with which the Remington Hotels parties may have an existing agreement, shall use
their reasonable discretion to determine how to allocate investment opportunities it identifies. In the event we materially modify
our investment guidelines without the written consent of Remington Hotels, the Ashford Trust parties will have superior rights
to investment opportunities identified by the Remington Hotels parties, and we will no longer retain preferential treatment to
investment opportunities identified by the Remington Hotels parties. A material modification for this purpose means any
modification of our initial investment guidelines to be competitive with Ashford Trust’s investment guidelines.
Our Exclusivity Rights. Remington Hotels and Mr. Monty J. Bennett have granted us a first right of refusal to pursue
certain lodging investment opportunities identified by Remington Hotels or its affiliates (including Mr. Bennett), including
opportunities to buy hotel properties, to buy land and build hotels, or to otherwise invest in hotel properties that satisfy our
initial investment guidelines and are not considered excluded transactions pursuant to the hotel management MEA. If
investment opportunities are identified and are subject to the hotel management MEA, and we have not materially modified our
initial investment guidelines without the written consent of Remington Hotels, then Remington Hotels, Mr. Bennett and their
affiliates, as the case may be, will not pursue those opportunities (except as described below) and will give us a written notice
and description of the investment opportunity, and we will have 10 business days to either accept or reject the investment
opportunity. If we reject the opportunity, Remington Hotels may then pursue such investment opportunity, subject to a right of
first refusal in favor of Ashford Trust pursuant to an existing agreement between Ashford Trust and Remington Hotels, on
materially the same terms and conditions as offered to us. If the terms of such investment opportunity materially change, then
Remington Hotels must offer the revised investment opportunity to us, whereupon we will have 10 business days to either
accept or reject the opportunity on the revised terms.
41
Reimbursement of Costs. If we accept an investment opportunity from Remington Hotels, we will be obligated to
reimburse Remington Hotels or its affiliates for the actual out-of-pocket and third-party costs and expenses paid by Remington
Hotels or its affiliates in connection with such investment opportunity, including any earnest money deposits, but excluding any
finder’s fee, brokerage fee, development fee or other compensation paid by Remington Hotels or its affiliates. Remington
Hotels must submit to us an accounting of the costs in reasonable detail.
Exclusivity Rights of Remington Hotels. If we elect to pursue an investment opportunity that consists of the management
and operation of a hotel property, we will hire Remington Hotels to provide such services unless our independent directors
either (i) unanimously elect not to engage Remington Hotels, or (ii) by a majority vote, elect not to engage Remington Hotels
because they have determined, in their reasonable business judgment, (A) special circumstances exist such that it would be in
our best interest not to engage Remington Hotels for the particular hotel, or (B) based on the prior performance of Remington
Hotels, another manager or developer could perform the management duties materially better than Remington Hotels for the
particular hotel. In return, Remington Hotels has agreed that it will provide those services.
Excluded Investment Opportunities. The following are excluded from the hotel management MEA and are not subject to
any exclusivity rights or right of first refusal:
• With respect to Remington Hotels, an investment opportunity where our independent directors have unanimously
voted not to engage Remington Hotels as the manager or developer.
• With respect to Remington Hotels, an investment opportunity where our independent directors, by a majority vote,
have elected not to engage Remington Hotels as the manager or developer based on their determination, in their
reasonable business judgment, that special circumstances exist such that it would be in our best interest not to engage
Remington Hotels with respect to the particular hotel.
• With respect to Remington Hotels, an investment opportunity where our independent directors, by a majority vote,
have elected not to engage Remington Hotels as the manager or developer because they have determined, in their
reasonable business judgment, that another manager or developer could perform the management, development or
other duties materially better than Remington Hotels for the particular hotel, based on Remington Hotels’ prior
performance.
•
•
•
Existing hotel investments of Remington Hotels or its affiliates with any of their existing joint venture partners,
investors or property owners.
Existing bona fide arm’s length third-party management arrangements (or arrangements for other services) of
Remington Hotels or any of its affiliates with third parties other than us and our affiliates.
Like-kind exchanges made pursuant to existing contractual obligations by any of the existing joint venture partners,
investors or property owners in which Remington Hotels or its affiliates have an ownership interest, provided that
Remington Hotels provides us with notice 10 days’ prior to such transaction.
Management or Development. If we hire Remington Hotels to manage or operate a hotel, it will be pursuant to the terms
of the master hotel management agreement agreed to between us and Remington Hotels.
Events of Default. Each of the following is a default under the hotel management MEA:
•
•
•
we or Remington Hotels experience a bankruptcy-related event;
we fail to reimburse Remington Hotels as described under “Reimbursement of Costs,” subject to a 30-day cure period;
and
we or Remington Hotels does not observe or perform any other term of the agreement, subject to a 30-day cure period
(which may be increased to a maximum of 120 days in certain instances).
If a default occurs, the non-defaulting party will have the option of terminating the hotel management MEA subject to 30
days’ written notice and pursuing its rights and remedies under applicable law.
Early Termination. Remington Hotels has the right to terminate the exclusivity rights granted to us if:
• Mr. Monty J. Bennett is removed as our chief executive officer or as chairman of our board of directors or is not re-
•
•
appointed to either position, or he resigns as chief executive officer or chairman of our board of directors;
we terminate the Remington Hotels exclusivity rights pursuant to the terms of the hotel management MEA; or
our advisory agreement with Ashford LLC is terminated for any reason pursuant to its terms and Mr. Monty J. Bennett
is no longer serving as our chief executive officer and chairman of our board of directors.
42
We may terminate the exclusivity rights granted to Remington Hotels if:
•
•
•
•
•
Remington Hotels fails to qualify as an “eligible independent contractor” as defined in Section 856(d)(9) of the Code
and for that reason, we terminate the master hotel management agreement with Remington Hotels;
Remington Hotels is no longer “controlled” by Mr. Monty J. Bennett or Mr. Archie Bennett, Jr. or their respective
family partnership or trusts, the sole members of which are at all times lineal descendants of Mr. Archie Bennett, Jr. or
Mr. Monty J. Bennett (including step children) and spouses;
we experience a change in control and terminate the master hotel management agreement between us and Remington
Hotels with respect to all hotels and have paid a termination fee equal to the product of (i) 65% of the aggregate
management fees budgeted in the annual operating budget applied to the hotels for the full current fiscal year in which
such termination is to occur for such hotels (both base fees and incentive fees, but in no event less than the base fees
and incentive fees for the preceding full fiscal year) and (ii) nine;
the Remington Hotels parties terminate our exclusivity rights pursuant to the terms of the mutual exclusivity
agreement; or
our advisory agreement with Ashford LLC is terminated for any reason pursuant to its terms and Mr. Monty J. Bennett
is no longer serving as our chief executive officer and chairman of our board of directors.
Assignment. The hotel management MEA may not be assigned by any of the parties without the prior written consent of
the other parties, provided that Remington Hotels can assign its interest in the hotel management MEA, without the written
consent of the other parties, to a “manager affiliate entity” as that term is defined in the agreement, so long as such affiliate
qualifies as an “eligible independent contractor” at the time of such transfer.
Relationship with Master Hotel Management Agreement. The rights provided to us and to Remington Hotels in the hotel
management MEA may be terminated if the master hotel management agreement between us and Remington Hotels terminates
in its entirety because of an event of default as to all of the then-managed properties. A termination of Remington Hotels’
management rights with respect to one or more hotels (but not all hotels) does not terminate the hotel management MEA. A
termination of the hotel management MEA does not terminate the master hotel management agreement either in part or in
whole, and the master hotel management agreement would continue in accordance with its terms as to the hotels covered,
despite a termination of the hotel management MEA.
Premier Project Management MEA
General. In connection with Ashford Inc.’s acquisition of Premier from Remington Lodging in August 2018, we entered
into the Mutual Exclusivity Agreement dated as of August 8, 2018 with Braemar OP and Premier, which agreement we refer to
below as the “project management MEA,” pursuant to which Premier gave us a first right of refusal to purchase any lodging-
related investments identified by Premier and any of its affiliates that met our initial investment criteria, and we agreed to
engage Premier to provide project management for hotels we acquired or invested in, to the extent that we had the right or
controlled the right to direct such matters.
Term. The initial term of the project management MEA is 10 years from November 19, 2013. This term automatically
extends for three additional renewal periods of seven years each and a final renewal period of four years, for a total of up to 35
years. The agreement may be sooner terminated because of:
•
•
an event of default (see “Events of Default”),
a termination of all our master project management agreements between the TRS lessee and Premier because of an
event of default under the master project management agreement that affects all properties (see “Relationship with
Master Project Management Agreement”).
Modification of Investment Guidelines. In the event that we materially modify our initial investment guidelines without
the written consent of Premier, which consent may be withheld at its sole and absolute discretion, Premier will have no
obligation to present or offer us investment opportunities at any time thereafter pursuant to the project management MEA.
Instead, Premier shall allocate investment opportunities it identifies pursuant to the terms of our advisory agreement. A material
modification for this purpose means any modification of our initial investment guidelines to be competitive with Ashford
Trust’s investment guidelines.
Our Exclusivity Rights. Premier and its affiliates have granted us a first right of refusal to pursue certain lodging
investment opportunities identified by Premier and its affiliates (including Mr. Bennett), including opportunities to buy hotel
properties, to buy land and build hotels, or to otherwise invest in hotel properties that satisfy our initial investment guidelines
and are not considered excluded transactions pursuant to the project management MEA. If investment opportunities are
identified and are subject to the project management MEA, and we have not materially modified our initial investment
43
guidelines, then Premier and its affiliates, as the case may be, will not pursue those opportunities (except as described below)
and will give us a written notice and description of the investment opportunity, and we will have 10 business days to either
accept or reject the investment opportunity. If we reject the opportunity, Premier may then pursue such investment opportunity,
on materially the same terms and conditions as offered to us. If the terms of such investment opportunity materially change,
then Premier and its affiliates must offer the revised investment opportunity to us, whereupon we will have 10 business days to
either accept or reject the opportunity on the revised terms.
Reimbursement of Costs. If we accept an investment opportunity from Premier, we will be obligated to reimburse Premier
or its affiliates for the actual out-of-pocket and third-party costs and expenses paid by Premier or its affiliates in connection
with such investment opportunity, including any earnest money deposits, but excluding any finder’s fee, brokerage fee,
development fee or other compensation paid by Premier or its affiliates. Premier must submit to us an accounting of the costs in
reasonable detail.
Exclusivity Rights of Premier. If we acquire or invest in a hotel or a property for the development or construction of a
hotel and have the right and/or control the right to direct the development and construction of and/or capital improvements to or
refurbishment of, or the provision of project management or other services, such as purchasing, interior design, freight
management, or construction management for such hotel or hotel improvements, we will hire Premier to provide such services
unless our independent directors either (i) unanimously elect not to engage Premier, or (ii) by a majority vote, elect not to
engage Premier because they have determined, in their reasonable business judgment, (A) special circumstances exist such that
it would be in our best interest not to engage Premier for the particular hotel, or (B) based on the prior performance of Premier,
another manager or developer could perform the project management, project related services or development duties materially
better than Premier for the particular hotel. In return, Premier has agreed that it will provide those services.
Excluded Investment Opportunities. The following are excluded from the project management MEA and are not subject to
any exclusivity rights or right of first refusal:
• With respect to Premier, an investment opportunity where our independent directors have unanimously voted not to
engage Premier as the manager or developer.
• With respect to Premier, an investment opportunity where our independent directors, by a majority vote, have elected
not to engage Premier as the manager or developer based on their determination, in their reasonable business
judgment, that special circumstances exist such that it would be in our best interest not to engage Premier with respect
to the particular hotel.
• With respect to Premier, an investment opportunity where our independent directors, by a majority vote, have elected
not to engage Premier as the manager or developer because they have determined, in their reasonable business
judgment, that another manager or developer could perform the project management, project related services or
development duties materially better than Premier for the particular hotel, based on Premier’s prior performance.
•
•
•
•
Existing hotel investments of Premier or its affiliates with any of their existing joint venture partners, investors or
property owners.
Existing bona fide arm’s length third-party project management arrangements of Premier or any of its affiliates with
third parties other than us and our affiliates.
Like-kind exchanges made pursuant to existing contractual obligations by any of the existing joint venture partners,
investors or property owners in which Premier or its affiliates have an ownership interest, provided that Premier
provides us with notice 10 days’ prior to such transaction.
Any hotel investment that does not satisfy our initial investment guidelines.
Development or Construction. If we hire Premier to develop and construct a hotel, the terms of the development and
construction will be pursuant to the terms of the master project management agreement that has been agreed to by us and
Premier.
Events of Default. Each of the following is a default under the project management MEA:
•
•
•
we or Premier experience a bankruptcy-related event;
we fail to reimburse Premier as described under “Reimbursement of Costs,” subject to a 30-day cure period; and
we or Premier does not observe or perform any other term of the agreement, subject to a 30-day cure period (which
may be increased to a maximum of 120 days in certain instances).
If a default occurs, the non-defaulting party will have the option of terminating the project management MEA subject to 30
days’ written notice and pursuing its rights and remedies under applicable law.
44
Assignment. The project management MEA may not be assigned by any of the parties without the prior written consent of
the other parties, provided that Premier can assign its interest in the project management MEA, without the written consent of
the other parties, to a “manager affiliate entity” as that term is defined in the agreement.
Relationship with Master Project Management Agreement. The rights provided to us and to Premier in the project
management MEA may be terminated if the master project management agreement between us and Premier terminates in its
entirety because of an event of default as to all of the then-managed properties. A termination of Premier’s project management
rights with respect to one or more hotels (but not all hotels) does not terminate the project management MEA. A termination of
the project management MEA does not terminate the master project management agreement either in part or in whole, and the
management agreements would continue in accordance with its terms as to the hotels covered, despite a termination of the
project management MEA.
Ashford Trust Right of First Offer Agreement
The right of first offer agreement provides us the first right to acquire each of the subject hotels owned by Ashford Trust, to
the extent the board of directors of Ashford Trust determines to market and sell the hotel, subject to any prior rights of the
managers of the hotel or other third parties and the limitations with respect to hotels in a joint venture set forth in the right of
first offer agreement. In addition, so long as we do not materially change our initial investment guidelines without the express
consent of Ashford LLC, the right of first offer agreement extends to hotels later acquired by Ashford Trust that satisfy our
initial investment guidelines.
If Ashford Trust decides to offer for sale an asset that fits our investment guidelines, it must give us a written notice
describing the sale terms and granting us the right to purchase the asset at a purchase price equal to the price set forth in the
offer. We will have 30 days to agree to the terms of the sale. If terms are not met, Ashford Trust will be free to sell the asset to
any person upon substantially the same terms as those contained in the written notice for 180 days, but not for a price less than
95% of the offered purchase price. If during such 180-day period, Ashford Trust desires to accept an offer that is not on
substantially the same terms as those contained in the written notice or that is less than 95% of the offered purchase price,
Ashford Trust must give us written notice of the new terms and we will have 10 days in which to agree to the terms of the sale.
If Ashford Trust does not close on the sale or refinancing of the asset within 180 days following the expiration of the initial 30-
day period, the right to purchase the asset will be reinstated on the same terms.
Likewise, we have agreed to give Ashford Trust a right of first offer with respect to any properties that we acquire in a
portfolio transaction, to the extent our board of directors determines it is appropriate to market and sell such assets and we
control the disposition, provided such assets satisfy Ashford Trust’s investment guidelines. Any such right of first offer granted
to Ashford Trust will be subject to certain prior rights, if any, granted to the managers of the related properties or other third
parties.
The right of first offer agreement has an initial term of 10 years and is subject to automatic one year renewal periods unless
one party notifies the other at least 180 days prior to the expiration of the current term that it does not intend to renew the
agreement. The agreement may be terminated by either party (i) upon a default of the other party upon giving notice of such
default and the defaulting party fails to cure within 45, or in some circumstances up to 90, days subject to certain exclusions,
and (ii) if the other party experiences specified bankruptcy events. Also, if we materially modify our initial investment
guidelines without consent of Ashford Trust (which consent may be withheld in its sole discretion), our right of first refusal for
any assets owned or later acquired by Ashford Trust and its affiliates, other than the initial assets subject to the right of
first offer agreement, will terminate unless otherwise agreed by the parties. Further, the agreement will automatically terminate
upon a termination of our advisory agreement or upon a change of control of either us or Ashford Trust, excluding any change
of control that may occur as a result of a spin-off, carve-out, split-off or other similar event.
TRS Leases
Three of the hotels we acquired from Ashford Trust in connection with the spin-off are owned by our operating partnership
and leased to subsidiaries of Braemar TRS. Two of our hotels are held in a joint venture in which we have a 75% equity
interest. The two hotels owned by the joint venture are leased to subsidiaries of the joint venture, which two subsidiaries we
have elected to treat as TRSs. Since 2013 Braemar TRS has formed multiple subsidiaries which lease acquired hotels. Braemar
TRS has elected to be treated as a TRS. Generally, we intend to lease all hotels we acquire in the future, other than pursuant to
sale-leaseback transactions with unrelated third parties, to a TRS lessee, pursuant to the terms of leases that are generally
similar to the terms of the existing leases, unless not appropriate based on relevant regulatory factors. Ashford LLC will
negotiate the terms and provisions of each future lease, considering such things as the purchase price paid for the hotel, then
current economic conditions and any other factors deemed relevant at the time. One hotel property, located in the U.S. Virgin
Islands, is owned by our USVI TRS.
45
Term. The leases for our hotel properties include a term of five years, which expires on December 31, 2025 (December 31,
2026 in the case of the Mr. C Beverly Hills Hotel). The leases may be terminated earlier than the stated term if certain events
occur, including specified damages to the related hotel, a condemnation of the related hotel or the sale of the related hotel, or an
event of default that is not cured within any applicable cure or grace periods. The lessor must pay a termination fee to the TRS
lessee if and to the extent the TRS lessee is obligated to pay a termination fee to the managers as a result of the termination of
the lease.
Amounts Payable Under Leases. The leases generally provide for each TRS lessee to pay in each calendar month the base
rent plus, in each calendar quarter, percentage rent, if any. The percentage rent for each hotel equals: (i) an agreed percentage of
gross revenue that exceeds a threshold amount, less (ii) all prior percentage rent payments.
Maintenance and Modifications. Each TRS lessee is required to establish and fund, in respect of each fiscal year during
the terms of the leases, a reserve account, in the amount of at least 4% of gross revenues per year to cover the cost of capital
expenditures, which costs will be paid by our operating partnership. Each TRS lessee shall be required to make (at our sole cost
and expense) all capital expenditures required in connection with emergency situations, legal requirements, maintenance of the
applicable franchise agreement, the performance by lessee of its obligations under the lease and other permitted additions to the
leased property. We also have the right to make additions, modifications or improvements so long as our actions do not
significantly alter the character or purposes of the property, significantly detract from the value or operating efficiency of the
property, significantly impair the revenue producing capability of the property or affect the ability of the lessee to comply with
the terms of their lease. All capital expenditures relating to material structural components involving expenditures of $1 million
or more are subject to the approval of our operating partnership. Each TRS lessee is responsible for all routine repair and
maintenance of the hotels, and our operating partnership will be responsible for non-routine capital expenditures.
We own substantially all personal property (other than inventory, linens, ERFP FF&E and other nondepreciable personal
property) not affixed to, or deemed a part of, the real estate or improvements on our hotels, unless ownership of such personal
property would cause the rent under a lease not to qualify as “rents from real property” for REIT income test purposes.
Insurance and Property Taxes. We pay real estate and personal property taxes on the hotels (except to the extent that
personal property associated with the hotels is owned by the applicable TRS lessee). We pay for property and casualty
insurance relating to the hotel properties and any personal property owned by us. Each TRS lessee pays for all insurance on its
personal property, comprehensive general public liability, workers’ compensation, vehicle, and other appropriate and customary
insurance. Each TRS lessee must name us as an additional insured on any policies it carries.
Assignment and Subleasing. The TRS lessees are not permitted to sublet any part of the hotels or assign their respective
interests under any of the leases without our prior written consent, which cannot be unreasonably withheld. No assignment or
subletting will release any TRS lessee from any of its obligations under the leases.
Damage to Hotels. If any of our insured hotels is destroyed or damaged, whether or not such destruction or damage
prevents use of the property as a hotel, the applicable TRS lessee will have the obligation, but only to the extent of insurance
proceeds that are made available, to restore the hotel. All insurance proceeds will be paid to our operating partnership (except
such proceeds payable for loss or damage to the TRS lessee’s personal property) and be paid to the applicable TRS lessee for
the reasonable costs of restoration or repair. Any excess insurance proceeds remaining after the cost of repair or restoration will
be retained by us. If the insurance proceeds are not sufficient to restore the hotel, the TRS lessee or we have the right to
terminate the lease upon written notice. In that event, neither we nor the TRS lessee will have any further liabilities or
obligations under the lease, except that, if we terminate the lease, we have to pay the TRS lessee termination fees, if any, within
45 days that become due under the management agreement. If the lease is so terminated, we will keep all insurance proceeds
received as a result of such destruction or damage. If the lease is terminated by a TRS lessee, we have the right to reject the
termination of the lease and to require the TRS lessee to restore the hotel, provided we agree to pay for all restoration costs in
excess of available insurance proceeds. In that event, the related lease will not terminate and we will pay all insurance proceeds
to the TRS lessee.
If the cost of restoration exceeds the amount of insurance proceeds, we will contribute any excess amounts necessary to
complete the restoration to the TRS lessee before requiring the work to begin. In the event of damage or destruction not covered
by insurance, our obligations, as well as those of the applicable TRS lessee, will be the same as in the case of inadequate
insurance proceeds. However, regardless of insurance coverage, if damage or destruction rendering the property unsuitable for
its primary intended purpose occurs within 24 months of the end of the lease term, we may terminate the lease with 30 days’
notice. If the lease remains in effect and the damage does not result in a reduction of gross revenues at the hotel, the TRS
lessee’s obligation to pay rent will be unabated. If, however, the lease remains in effect but the damage does result in a
reduction of gross revenues at the hotel, the TRS lessee will be entitled to a certain amount of rent abatement while the hotel is
being repaired. We will keep all proceeds from loss of income insurance.
46
Condemnation. If any of our hotels is subject to a total condemnation or a partial taking that prevents use of the property as
a hotel, we and the TRS lessee each have the option to terminate the related lease. We will share in the condemnation award
with the TRS lessee in accordance with the provisions of the related lease. If any partial taking of a hotel does not prevent use
of the property as a hotel, the TRS lessee is obligated to restore the untaken portion of the hotel to a complete architectural unit
but only to the extent of any available condemnation award. If the condemnation award is not sufficient to restore the hotel, the
TRS lessee or we have the right to terminate the lease upon written notice. If the lease is terminated by the TRS lessee, we have
the right to reject the termination of the lease within 30 days and to require the TRS lessee to restore the hotel, provided we
agree to pay for all restoration costs in excess of the available condemnation award. We will contribute the cost of such
restoration to the TRS lessee. If a partial taking occurs, the base rent will be abated to some extent, taking into consideration,
among other factors, the number of usable rooms, the amount of square footage, or the revenues affected by the partial taking.
Events of Default. Events of Default under the leases include:
• The TRS lessee fails to pay rent or other amounts due under the lease, provided that the TRS lessee has a 10-day cure
period after receiving a written notice from us that such amounts are due and payable before an event of default would
occur.
• The TRS lessee does not observe or perform any other term of a lease, provided that the TRS lessee has a 30-day cure
period after receiving a written notice from us that a term of the lease has been violated before an event of default of
default would occur. There are certain instances in which the 30-day grace period can be extended to a maximum of
120 days.
• The TRS lessee is the subject of a bankruptcy, reorganization, insolvency, liquidation or dissolution event.
• The TRS lessee voluntarily ceases operations of the hotels for a period of more than 30 days, except as a result of
damage, destruction, condemnation, or certain specified unavoidable delays.
• The default of the TRS lessee under the management agreement for the related hotel because of any action or failure to
act by the TRS lessee and the TRS lessee has failed to cure the default within 30 days.
If an event of default occurs and continues beyond any grace period, we have the option of terminating the related lease. If
we decide to terminate a lease, we must give the TRS lessee 10 days’ written notice. Unless the event of default is cured before
the termination date we specify in the termination notice, the lease will terminate on the specified termination notice. In that
event, the TRS lessee will be required to surrender possession of the related hotel and pay liquidated damages at our option, as
provided by the applicable lease.
Termination of Leases. Our operating partnership generally has the right to terminate any lease prior to the expiration date
so long as we pay a termination fee. The termination fee is equal to any termination fee due to a manager under the
management agreement.
Indemnification. Each TRS lessee is required to indemnify us for claims arising out of (i) accidents occurring on or about
the leased property, (ii) any past, present or future use or condition of the hotel by TRS lessee or any of its agents, employees or
invitees, (iii) any impositions that are the obligation of the TRS hotel by lessee, (iv) any failure of the TRS lessee to perform
under the lease, and (v) the non-performance of obligations under any sub-lease by the landlord thereunder. We are required to
indemnify each TRS lessee for any claim arising out of our gross negligence or willful misconduct arising in connection with
the lease and for any failure to perform our obligations under the lease. All indemnification amounts must be paid within 10
days of a determination of liability.
Breach by Us. If we breach any of the leases, we will have 30 days from the time we receive written notice of the breach
from the TRS lessee to cure the breach. This cure period may be extended in the event of certain specified, unavoidable delays.
Ground Leases
Two of our hotels are subject to ground leases that cover all of the land underlying the respective hotels.
Hilton La Jolla Torrey Pines. The Hilton La Jolla Torrey Pines is subject to a ground lease with the City of San Diego and
expires May 31, 2067. The lease term may be extended by either 10 years or 20 years depending on the amount of capital spent
at the hotel. If 5% of gross income is spent on capital expenditures during the lease term, the term may be extended by 10 years.
If 6% of gross income is spent on capital expenditures during the lease term, the term may be extended by 20 years. Rent is
payable monthly and is the greater of minimum rent or percentage rent, determined monthly, with an annual true-up.
Commencing January 1, 1993 and every five years thereafter, minimum rent is adjusted to be 80% of the annual average of
actual rents paid or accrued during the preceding five-year period, but in no event may such rent be adjusted downwards.
Percentage rent is determined from a percentage of room and banquet rental revenue, food and beverage sales, alcohol sales,
lobby, gift shop and coin operated machine and telephone sales and other authorized uses. Percentage rent is adjusted at least
47
six months prior to the end of (December 31, 2027) and thereafter at least six months prior to each 10th year by mutual
agreement to provide fair rental to landlord. The lease may be assigned with the landlord’s prior written consent. Upon any
assignment or a sublease of a majority of the premises, 2% of the gross amounts paid for the assignment or sublease are payable
to the landlord except in the instances of a transfer to an affiliate or a mortgage foreclosure. In addition, 2% of the net proceeds
are payable to the landlord in the event of a refinancing.
Bardessono Hotel and Spa. The Bardessono Hotel and Spa is subject to a ground lease with Bardessono Brothers LLC and
expires October 31, 2065, with two 25-year extension options. Rent is payable monthly and is the greater of minimum rent or
percentage rent with an annual true-up on October 1. Each year, annual base minimum rent is increased (but never decreased)
by an amount equal to the percentage increase in CPI Index during the prior 12-month period that starts on September 1 and
ends on August 31. In no event will the index percentage be less than 101.5% nor more than 103.5% multiplied by the annual
base minimum rent payable by tenant during the lease year just ending. A percentage rent, which is calculated on the positive
difference (if any) between the greater of 8% of net rooms revenue or 4.5% of net operating revenue and the aggregate base
minimum rent actually paid by the tenant during the same calendar year will be paid on a calendar year basis. Within 90 days
after end of calendar year tenant must provide landlord an officer’s certificate containing tenant’s financial statements and
percentage rent payment, if any. The lease may be assigned with the landlord’s prior written consent at least 60 days but not
more than 90 days before the effective date of the proposed assignment. Tenant must submit to landlord a statement containing
contact and financial information, operating and property ownership history, and other information with respect to the proposed
assignee or subtenant as landlord may reasonably require, the type of use proposed for the inn parcel or resort, and all of the
principal terms of the proposed assignment; copy of proposed assignment; and a copy of the landlord’s consent to assignment.
In August of 2016, the lease was amended to allow for the expansion of the leased premises by 10,000 square feet to
accommodate construction of the Presidential Villa.
Regulation
General
Our hotels are subject to various U.S. federal, state and local laws, ordinances and regulations, including regulations
relating to common areas and fire and safety requirements. We believe that each of our hotels has the necessary permits and
approvals to operate its business.
Governmental Regulations
Our properties are subject to various federal, state and local regulatory laws and requirements, including, but not limited to,
the Americans with Disabilities Act of 1990, as amended (the “ADA”), zoning regulations, building codes and land use laws,
and building, occupancy and other permit requirements. Noncompliance could result in the imposition of governmental fines or
the award of damages to private litigants. While we believe that we are currently in material compliance with these regulatory
requirements, the requirements may change or new requirements may be imposed that could require significant unanticipated
expenditures by us. Additionally, local zoning and land use laws, environmental statutes, health and safety rules and other
governmental requirements may restrict, or negatively impact, our property operations, or expansion, rehabilitation and
reconstruction activities and such regulations may prevent us from taking advantage of economic opportunities. Future changes
in federal, state or local tax regulations applicable to REITs, real property or income derived from our real estate could impact
the financial performance, operations, and value of our properties and the Company.
Environmental Matters
Under various laws relating to the protection of the environment, a current or previous owner or operator (including
tenants) of real estate may be liable for contamination resulting from the presence or discharge of hazardous or toxic substances
at that property and may be required to investigate and clean up such contamination at that property or emanating from that
property. These costs could be substantial and liability under these laws may attach without regard to whether the owner or
operator knew of, or was responsible for, the presence of the contaminants, and the liability may be joint and several. The
presence of contamination or the failure to remediate contamination at our hotels may expose us to third-party liability or
materially and adversely affect our ability to sell, lease or develop the real estate or to incur debt using the real estate as
collateral.
Our hotels are subject to various federal, state, and local environmental, health and safety laws and regulations that address
a wide variety of issues, including, but not limited to, storage tanks, air emissions from emergency generators, storm water and
wastewater discharges, lead-based paint, mold and mildew and waste management. Our hotels incur costs to comply with these
laws and regulations and could be subject to fines and penalties for non-compliance.
48
Some of our hotels may contain or develop harmful mold or suffer from other adverse conditions, which could lead to
liability for adverse health effects and costs of remediation. The presence of significant mold or other airborne contaminants at
any of our hotels could require us to undertake a costly remediation program to contain or remove the mold or other airborne
contaminants from the affected hotel or increase indoor ventilation. In addition, the presence of significant mold or other
airborne contaminants could expose us to liability from guests or employees at our hotels and others if property damage or
health concerns arise.
Insurance
We carry comprehensive general liability, “All Risk” property, business interruption, cybersecurity, directors and officers,
rental loss coverage and umbrella liability coverage on all of our hotels and earthquake, wind, flood and hurricane coverage on
hotels in areas where we believe such coverage is warranted, in each case with limits of liability that we deem adequate.
Similarly, we are insured against the risk of direct physical damage in amounts we believe to be adequate to reimburse us, on a
replacement basis, for costs incurred to repair or rebuild each hotel, including loss of rental income during the reconstruction
period. We have selected policy specifications and insured limits which we believe to be appropriate given the relative risk of
loss, the cost of the coverage and industry practice. We do not carry insurance for generally uninsured losses, including, but not
limited to losses caused by riots, global pandemics war or acts of God as well as certain types coverages previously available
under policies set forth above (for example, communicable disease, abuse & molestation coverages previously available under
general liability policies). In the opinion of our management, our hotels are adequately insured.
Competition
The hotel industry is highly competitive and the hotels in which we invest are subject to competition from other hotels for
guests. Competition is based on a number of factors, most notably convenience of location, availability of rooms, brand
affiliation, price, range of services, guest amenities or accommodations offered and quality of customer service. Competition is
often specific to the individual markets in which our properties are located and includes competition from existing and new
hotels. Increased competition could have a material adverse effect on the occupancy rate, average daily room rate and rooms
revenue per available room of our hotels or may require us to make capital improvements that we otherwise would not have to
make, which may result in decreases in our profitability.
Our principal competitors include other hotel operating companies, ownership companies and national and international
hotel brands. We face increased competition from providers of less expensive accommodations, such as select service hotels or
independent owner-managed hotels, during periods of economic downturn when leisure and business travelers become more
sensitive to room rates. We also experience competition from alternative types of accommodations such as home sharing
companies.
We face competition for the acquisition of hotels from institutional pension funds, private equity funds, REITs, hotel
companies and others who are engaged in the acquisition of hotels. Some of these competitors have substantially greater
financial and operational resources and access to capital than we have and may have greater knowledge of the markets in which
we seek to invest. This competition may reduce the number of suitable investment opportunities offered to us and decrease the
attractiveness of the terms on which we may acquire our targeted hotel investments, including the cost thereof.
Employees
We have no employees. Our appointed officers are provided by Ashford LLC, a subsidiary of Ashford Inc. (collectively,
our “advisor”). Advisory services which would otherwise be provided by employees are provided by subsidiaries of Ashford
Inc. and by our appointed officers. Subsidiaries of Ashford Inc. have approximately 119 full-time employees who provide
advisory services to us. These employees directly or indirectly perform various acquisition, development, asset management,
capital markets, accounting, tax, risk management, legal, redevelopment, and corporate management functions pursuant to the
terms of our advisory agreement.
Seasonality
Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the
summer months, while certain other properties maintain higher occupancy rates during the winter months. This seasonality
pattern can cause fluctuations in our quarterly revenue. 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 the COVID-19
pandemic and government-issued travel restrictions in response, 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 are insufficient during any quarter to enable us to
make quarterly distributions to maintain our REIT status due to temporary or seasonal fluctuations in lease revenue, we expect
49
to utilize cash on hand, cash generated through borrowings and issuances of common or preferred stock to fund required
distributions. However, we cannot make any assurances that we will make distributions in the future.
Access to Reports and Other Information
We maintain a website at www.bhrreit.com. On our website, we make available free of charge our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with the
Securities and Exchange Commission (“SEC”). All of our filed reports can also be obtained at the SEC’s website at
www.sec.gov. In addition, our Code of Business Conduct and Ethics, Code of Ethics for the Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer, Corporate Governance Guidelines, and Board Committee Charters are also
available free-of-charge on our website or can be made available in print upon request. A description of any substantive
amendment or waiver of our Code of Business Conduct and Ethics or our Code of Ethics for the Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer will be disclosed on our website under the Corporate Governance section. Any
such description will be located on our website for a period of 12 months following the amendment or waiver. We also use our
website to distribute company information, and such information may be deemed material. Accordingly, investors should
monitor our website, in addition to our press releases, SEC filings and public conference calls and webcasts. The contents of
our website are not, however, a part of this report.
Item 1A. Risk Factors
Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or
may adversely affect our business, financial condition, results of operations, cash flows, and prospects. Moreover, many risk
factors set forth below should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic. These
risks are discussed more fully below and include, but are not limited to, risks related to:
•
•
•
•
•
•
•
•
•
•
•
•
•
the impact of the ongoing COVID-19 pandemic, including the resurgence of cases relating to the spread of the Delta,
Omicron or other potential variants, on our business, financial condition, liquidity and results of operations;
adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and travel
restrictions in regions where our hotels are located, and one or more possible recurrences of COVID-19 case surges
causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or
local governments;
our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our
liquidity requirements;
actions by our lenders to accelerate loan balances and foreclose on the hotel properties that are security for our loans if
we are unable to make debt service payments or satisfy our other obligations under the forbearance agreements;
general volatility of the capital markets and the market price of our common and preferred stock;
availability, terms and deployment of capital;
unanticipated increases in financing and other costs, including a rise in interest rates;
availability of qualified personnel to our advisor;
actual and potential conflicts of interest with Ashford Trust, Ashford Inc. and its subsidiaries (including Ashford LLC,
Remington Hotels and Premier) and our executive officers and our non-independent director;
changes in personnel of Ashford LLC or the lack of availability of qualified personnel;
changes in governmental regulations, accounting rules, tax rates and similar matters;
legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”)
and related rules, regulations and interpretations governing the taxation of REITs; and
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.
Risks Related to Our Business and Properties
A financial crisis, economic slowdown, pandemic, or epidemic or other economically disruptive event may harm the
operating performance of the hotel industry generally. If such events occur, we may be impacted by declines in occupancy,
average daily room rates and/or other operating revenues.
The performance of the lodging industry has been closely linked with the performance of the general economy and,
specifically, growth in the U.S. GDP. We invest in hotels that are classified as luxury. In an economic downturn, these types of
hotels may be more susceptible to a decrease in revenue, as compared to hotels in other categories that have lower room rates.
This characteristic may result from the fact that luxury hotels generally target business and high-end leisure travelers. In periods
50
of economic difficulties or concerns with respect to communicable disease, business and leisure travelers may seek to reduce
travel costs and/or health risks by limiting travel or seeking to reduce costs on their trips. Any economic recession will likely
have an adverse effect on our business, operating results and prospects. Our business has been and will continue to be
materially affected by the impact of the COVID-19 pandemic, see the risk factor “The outbreak of COVID-19 has and will
continue to reduce our occupancy rates and RevPAR.”
We did not pay dividends on our common stock in fiscal years 2020 and 2021 and we may not pay dividends on our
common stock or preferred stock in the future.
We did not pay dividends on our common stock in fiscal years 2020 and 2021. On January 10, 2022, our board of directors
declared dividends on our preferred stock for the first quarter of 2022 in the amount that such holders of our preferred stock are
entitled to receive. On March 4, 2022, our board of directors declared a quarterly cash dividend of $0.01 per diluted share for
the Company’s common stock for the first quarter of 2022. Additionally, in March 2022, the board of directors approved an
update to our previously announced dividend policy for 2022 to revise our then-expectation to pay a quarterly dividend of $0.01
per share of common stock during 2022. The approval of our dividend policy does not commit our board of directors to declare
future dividends with respect to any quantity or the amount thereof and the board of directors may decide not to pay any
dividends on our common stock and/or preferred stock. We may not pay dividends on our common stock or preferred stock in
the future, particularly in light of the downturn in our business occasioned by the COVID-19 pandemic and the demands of our
property-level lenders. If we fail to pay dividends on our common stock or preferred stock, the market price of our common
stock or preferred stock will likely be adversely affected.
We are required to make minimum base advisory fee payments to our advisor, Ashford Inc., under our advisory
agreement, which must be paid even if our total market capitalization and performance decline. Similarly, we are required to
make minimum base hotel management fee payments under our hotel management agreements with Remington Hotels, a
subsidiary of Ashford Inc., which must be paid even if revenues at our hotels decline significantly.
Pursuant to the advisory agreement between us and our advisor, we must pay our advisor on a monthly basis a base
advisory fee (based on our total market capitalization), 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) 1/12th 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, including as a result of the impact of COVID-19, we will
still be required to make monthly payments to our advisor equal to the minimum base management fee, which could adversely
impact our liquidity and financial condition.
Similarly, pursuant to our hotel management agreement with Remington Hotels, a subsidiary of Ashford Inc., we pay
Remington Hotels monthly base hotel management fees on a per hotel basis equal to the greater of approximately $15,000 per
hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues. As a result, even if revenues at
our hotels decline significantly, we will still be required to make minimum monthly payments to Remington Hotels equal to
approximately $15,000 per hotel (increased annually based on consumer price index adjustments), which could adversely
impact our liquidity and financial condition.
Our business is significantly influenced by the economies and other conditions in the specific markets in which we
operate, particularly in the metropolitan areas where we have high concentrations of hotels.
Our hotels are located in the Washington, D.C., San Francisco, San Diego, Sarasota, Seattle, Philadelphia, Chicago, Key
West, Vail/Beaver Creek, Lake Tahoe, Los Angeles and St. Thomas metropolitan areas. As a result, we are particularly
susceptible to adverse market conditions in these areas and any additional areas in which we may acquire assets in the future,
including industry downturns, relocation of businesses and any oversupply of hotel rooms or a reduction in lodging demand.
Adverse economic developments in the markets in which we have a concentration of hotels, or in any of the other markets in
which we operate, or any increase in hotel supply or decrease in lodging demand resulting from the local, regional or national
business climate, could adversely affect our business, operating results and prospects.
Our investments are concentrated in the hotel industry, and our business would be adversely affected by an economic
downturn in that sector.
Our investments are concentrated in the hotel industry. This concentration may expose us to the risk of economic
downturns in the hotel real estate sector, including as a result of COVID-19, to a greater extent than if our properties were more
diversified across other sectors of the real estate industry.
51
We face risks related to changes in the global economic and political environment, including capital and credit markets.
Our business may be harmed by global economic conditions, which recently have been volatile. Political crises in
individual countries or regions, including sovereign risk related to a deterioration in the creditworthiness of or a default by local
governments, has contributed to this volatility. If the global economy experiences continued volatility or significant disruptions,
such disruptions or volatility could hurt the U.S. economy and our business. More specifically, in addition to experiencing
reduced demand for business and leisure travel because of a slow-down in the general economy, we could be harmed by
disruptions resulting from tighter credit markets or by illiquidity resulting from an inability to access credit markets to obtain
cash to support operations or make distributions to our stockholders as a result of global or international developments.
We invest in the luxury segments of the lodging market, which are highly competitive and generally subject to greater
volatility than most other market segments and could negatively affect our profitability.
The luxury segments of the hotel business are highly competitive. Our hotel properties compete on the basis of location,
room rates, quality, amenities, service levels, reputation and reservations systems, among many factors. There are many
competitors in the luxury segments, and many of these competitors may have substantially greater marketing and financial
resources than we have. This competition could reduce occupancy levels and rooms revenue at our hotels. Over-building in the
lodging industry may increase the number of rooms available and may decrease occupancy and room rates. In addition, in
periods of weak demand, as may occur during a general economic recession, our profitability may be negatively affected by the
relatively high fixed costs of operating luxury hotels. If our hotels cannot compete effectively for guests, they will earn less
revenue, which would result in lower cash available for us to meet debt service obligations, operating expenses, and make
requisite distributions to stockholders.
Because we depend upon Ashford LLC and its affiliates to conduct our operations, any adverse changes in the financial
condition of Ashford LLC or its affiliates or our relationship with them could hinder our operating performance.
We depend on Ashford LLC to manage our assets and operations. Any adverse changes in the financial condition of
Ashford LLC, or its affiliates or our relationship with Ashford LLC could hinder its ability to manage us successfully.
We depend on Ashford LLC’s key personnel with long-standing business relationships. The loss of Ashford LLC’s key
personnel could threaten our ability to operate our business successfully.
Our future success depends, to a significant extent, upon the continued services of Ashford LLC’s management team. In
particular, the hotel industry experience of Messrs. Monty J. Bennett, Richard J. Stockton, Alex Rose, Deric S. Eubanks,
Jeremy Welter, Mark L. Nunneley, and J. Robison Hays III, and the extent and nature of the relationships they have developed
with hotel franchisors, operators, and owners and hotel lending and other financial institutions are critically important to the
success of our business. The loss of services of one or more members of Ashford LLC’s management team could harm our
business and our prospects.
The aggregate amount of fees and expense reimbursements paid to our advisor will exceed the average of internalized
expenses of our industry peers (as provided in our advisory agreement), as a percentage of total market capitalization. As a
part of these fees, we must pay a minimum advisory fee to our advisor regardless of our performance.
Pursuant to the advisory agreement between us and our advisor, we must pay our advisor a monthly base management fee
(subject to a minimum fee described below) in an amount equal to 1/12th of the sum of (i) 0.70% of the total market
capitalization of our company for the prior month, and (ii) the Net Asset Fee Adjustment (as defined in our advisory
agreement), an annual incentive fee that will be based on our achievement of certain minimum performance thresholds and
certain expense reimbursements. The monthly minimum base management fee will be equal to the greater of (i) 90% of the base
fee paid for the same month in the prior year; and (ii) 1/12th of the “G&A Ratio” for the most recently completed fiscal quarter
multiplied by the Total Market Capitalization (as defined in our advisory agreement) on the last balance sheet date included in
the most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed by the Company with the SEC. The
“G&A Ratio” will be calculated as the simple average of the ratios of total general and administrative expenses paid, less any
non-cash expenses but including any dead-deal costs, in the applicable quarter by each member of a select peer group, divided
by the total market capitalization of such peer group member (as provided in our advisory agreement). Since the base
management fee is subject to this minimum amount and because a portion of such fees are contingent on our performance, the
fees we pay to our advisor may fluctuate over time. However, regardless of our advisor’s performance, the total amount of fees
and reimbursements paid to our advisor as a percentage of market capitalization will never be less than the average of
internalized expenses of our industry peers (as provided in our advisory agreement), and there may be times when the total
amount of fees and incentives paid to our advisor greatly exceeds the average of internalized expenses of our industry peers.
52
Our advisor’s entitlement to non-performance-based compensation, including the minimum base management fee, might
reduce its incentive to devote its time and effort to seeking investments that provide attractive risk-adjusted returns for our
portfolio. Further, our incentive fee structure may induce our advisor to encourage us to acquire certain assets, including
speculative or high risk assets, or to acquire assets with increased leverage, which could increase the risk to our portfolio. For
additional information, see the risk factor “We are required to make minimum base advisory fee payments to our advisor,
Ashford Inc., under our advisory agreement, which must be paid even if our total market capitalization and performance
decline. Similarly, we are required to make minimum base hotel management fee payments under our hotel management
agreements with Remington Hotels, a subsidiary of Ashford Inc., which must be paid even if revenues at our hotels decline
significantly.”
Our business strategy depends on acquiring additional hotel properties on attractive terms and the failure to do so or to
otherwise manage our planned growth successfully may adversely affect our business and operating results.
We intend to acquire additional hotel properties in the future. We face significant competition for attractive investment
opportunities from other well-capitalized investors, some of which have greater financial resources and greater access to debt
and equity capital than we have. This competition increases as investments in real estate become increasingly attractive relative
to other forms of investment. This competition could limit the number of suitable investment opportunities offered to us. It may
also increase the bargaining power of property owners seeking to sell to us, making it more difficult for us to acquire new
properties on attractive terms or on the terms contemplated in our business plan. As a result of such competition, we may be
unable to acquire hotel properties that we deem attractive at prices that we consider appropriate or on terms that are satisfactory
to us. If we do identify an appropriate acquisition candidate, we may not be able to successfully negotiate the terms of the
acquisition. In addition, we expect to finance future acquisitions through a combination of the use of retained cash flows,
property-level debt, and offerings of equity and debt securities, which may result in additional leverage or dilution to our
stockholders. Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate and integrate such
acquisitions could materially impede our growth.
In addition, we expect to compete to sell hotel properties. Availability of capital, the number of hotel properties available
for sale and market conditions, all affect prices. We may not be able to sell hotel assets at our targeted price.
There is no guarantee that Ashford Trust will sell us any of the properties that are subject to the right of first offer
agreement.
We may not be able to acquire any of the properties that are subject to the right of first offer agreement, either because
Ashford Trust does not elect to sell such properties or we are not in a position to acquire the properties when Ashford Trust
elects to sell. Further, if we materially change our investment guidelines without the express consent of Ashford LLC, no hotels
acquired by Ashford Trust after the date of such change will be subject to the right of first offer.
We may be unable to successfully integrate and operate acquired properties, which may have a material adverse effect on
our business and operating results.
Even if we are able to make acquisitions on favorable terms, we may not be able to successfully integrate and operate them.
We may be required to invest significant capital and resources after an acquisition to maintain or grow the properties that we
acquire. In addition, we may need to adapt our management, administrative, accounting, and operational systems, or hire and
retain sufficient operational staff, to integrate and manage successfully any future acquisitions of additional assets. These and
other integration efforts may disrupt our operations, divert Ashford LLC’s attention away from day-to-day operations and cause
us to incur unanticipated costs. The difficulties of integration may be increased by the necessity of coordinating operations in
geographically dispersed locations. Our failure to integrate successfully any acquisitions into our portfolio could have a material
adverse effect on our business and operating results. Further, acquired properties may have liabilities or adverse operating
issues that we fail to discover through due diligence prior to the acquisition. The failure to discover such issues prior to such
acquisition could have a material adverse effect on our business and results of operations.
Because our board of directors and Ashford LLC have broad discretion to make future investments, we may make
investments that result in returns that are substantially below expectations or in net operating losses. In addition, our investment
policies may be revised from time to time at the discretion of our board of directors, without a vote of our stockholders. Such
discretion could result in investments with yield returns inconsistent with stockholders’ expectations.
Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on a
co-venturer’s financial condition and disputes between us and our co-venturers.
We own interests in two hotels through a joint venture and we do not have sole decision-making authority regarding these
two properties. In addition, we may continue to co-invest with third parties through partnerships, joint ventures or other entities,
53
acquiring controlling or noncontrolling interests in, or sharing responsibility for, managing the affairs of a property, partnership,
joint venture or other entity. We may not be in a position to exercise sole decision-making authority regarding any future
properties that we may hold in a partnership or joint venture. Investments in partnerships, joint ventures or other entities may,
under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or
co-venturers might become bankrupt, suffer a deterioration in their financial condition or fail to fund their share of required
capital contributions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent
with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such
investments may also have the potential risk of impasses on decisions, such as a sale, budgets, or financing, because neither we
nor the partner or co-venturer have full control over the partnership or joint venture. Disputes between us and partners or co-
venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from
focusing their time and effort on our business. Consequently, actions by, or disputes with, partners or co-venturers might result
in subjecting properties owned by the partnership or joint venture to additional risk. In addition, we may in certain
circumstances be liable for the actions of our third-party partners or co-venturers.
Hotel franchise or management agreement requirements or the loss of such an agreement could adversely affect us.
We must comply with operating standards, terms, and conditions imposed by the franchisors or managers of the hotel
brands under which our hotels operate. Franchisors periodically inspect their licensed hotels to confirm adherence to their
operating standards. The failure of a hotel to maintain these standards could result in the loss or cancellation of a franchise
license or other authority pursuant to which our hotels are branded and operated. With respect to operational standards, we rely
on our hotel managers to conform to such standards. Franchisors or managers may also require us to make certain capital
improvements to maintain the hotel in accordance with system standards, the cost of which can be substantial. A franchisor or
manager could condition the continuation of branding and operational support based on the completion of capital improvements
that Ashford LLC or our board of directors determines is not economically feasible in light of general economic conditions, the
operating results or prospects of the affected hotel or other circumstances. In that event, Ashford LLC or our board of directors
may elect to allow the franchise or management agreement to lapse or be terminated, which could result in a termination charge
as well as a change in branding or operation of the hotel as an independent hotel. In addition, when the term of such agreement
expires there is no obligation to issue a new franchise.
The loss of a franchise or management agreement could have a material adverse effect on the operations and/or the
underlying value of the affected hotel because of the loss of associated name recognition, marketing support and centralized
reservation systems provided by the franchisor or manager. Any such material adverse effect on one or more of our hotels may,
in turn, have a material adverse effect on our business and operating results.
We do not have any employees, and rely on our hotel managers to employ the personnel required to operate the hotels we
own. As a result, we have less ability in the COVID-19 environment to reduce staffing at our hotels than we would if we
employed such personnel directly. Additionally, our reliance on third-party hotel managers to operate our hotels and for a
substantial majority of our cash flow may adversely affect us.
We do not have any employees. We contractually engage hotel managers, such as Marriott (or its affiliates), Hilton (or its
affiliates), Hyatt, Accor and our affiliate, Remington Hotels, which is owned by Ashford Inc., to operate, and to employ the
personnel required to operate, our hotels. Each hotel manager is required under the applicable hotel management agreement to
determine appropriate staffing levels; and we are required to reimburse the applicable hotel manager for the cost of these
employees. As a result, we are dependent on our hotel managers to make appropriate staffing decisions and to appropriately
reduce staffing when market conditions are poor, and have less ability in the COVID-19 environment to reduce staffing at our
hotels than we would if we employed such personnel directly. As a result, our hotels may be staffed at a level higher than we
would choose if we employed the personnel required to operate the hotels. In addition, we may be less likely to take aggressive
actions (such as delaying payments owed to our hotel managers) in order to influence the staffing decisions made by Remington
Hotels, which is our affiliate.
Additionally, because U.S. federal income tax laws restrict REITs and their subsidiaries from operating or managing hotels,
third parties must operate our hotels. A REIT may lease its hotels to TRSs in which the REIT can own up to a 100% interest. A
TRS pays corporate-level income tax and may retain any after-tax income. A REIT must satisfy certain conditions to use the
TRS structure. One of those conditions is that the TRS must hire, to manage the hotels, an “eligible independent
contractor” (“EIC”) that is actively engaged in the trade or business of managing hotels for parties other than the REIT. An EIC
cannot (i) own more than 35% of the REIT, (ii) be owned more than 35% by persons owning more than 35% of the REIT, or
(iii) provide any income to the REIT (i.e., the EIC cannot pay fees to the REIT, and the REIT cannot own any debt or equity
securities of the EIC). Accordingly, while we may lease hotels to a TRS that we own, the TRS must engage a third-party
operator to manage the hotels. Thus, our ability to direct and control how our hotels are operated is less than if we were able to
manage our hotels directly.
54
We are parties to hotel management agreements under which unaffiliated third-party hotel managers manage our hotels.
We have also entered into a master hotel management agreement with Remington Hotels, a subsidiary of Ashford Inc., pursuant
to which Remington Hotels currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville
and Mr. C Beverly Hills Hotel. We do not supervise any of the hotel managers or their respective personnel on a day-to-day
basis. Without such supervision, our hotel managers may not manage our properties in a manner that is consistent with their
respective obligations under the applicable management agreement or our obligations under our hotel management agreements,
which are similar to franchise agreements, be negligent in their performance, engage in criminal or fraudulent activity, or
otherwise default on their respective management obligations to us. If any of these events occur, our relationships with any
managers may be damaged, we may be in breach of our management agreement, and we could incur liabilities resulting from
loss or injury to our property or to persons at our properties. In addition, from time to time, disputes may arise between us and
our third-party managers regarding their performance or compliance with the terms of the hotel management agreements, which
in turn could adversely affect us. If we are unable to resolve such disputes through discussions and negotiations, we may choose
to terminate our management agreement, litigate the dispute or submit the matter to third-party dispute resolution, the expense
of which may be material and the outcome of which may harm our business, operating results or prospects.
On October 24, 2019, the Company provided notice to Accor of the material breach of its responsibilities under the Accor
management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago, Illinois. On November
7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York
County, seeking a declaratory judgment that no breach had occurred. Accor’s complaint was dismissed on or about February
27, 2020. On January 6, 2020, Ashford TRS Chicago II filed a complaint against Accor in the Supreme Court of the State of
New York, New York County, alleging breach of the Accor management agreement and seeking declaration of its right to
terminate the Accor management agreement. On July 20, 2020, Accor filed an Amended Answer and Counterclaims against
Ashford TRS Chicago II. On February 23, 2022, Ashford TRS Chicago II and Accor filed a stipulation of discontinuance
dismissing all claims, counterclaims, and cross-claims in the January 6, 2020 action with prejudice.
Our management agreements could adversely affect our ability to sell or finance our hotel properties.
Our management agreements do not allow us to replace hotel managers on relatively short notice or with limited cost and
also contain other restrictive covenants. We may enter into additional such agreements or acquire properties subject to such
agreements in the future. For example, the terms of a management agreement may restrict our ability to sell a property unless
the purchaser is not a competitor of the manager, assumes the management agreement and meets other conditions. Also, the
terms of a long-term management agreement encumbering our property may reduce the value of the property. When we enter
into or acquire properties subject to any such management agreements, we may be precluded from taking actions that we
believe to be in our best interest and could incur substantial expense as a result.
Eight of our hotels currently operate under Marriott or Hilton brands; therefore, we are subject to risks associated with
concentrating our portfolio in just two brand families.
Eight of our 14 hotels utilize brands owned by Marriott (or its affiliates) or Hilton (or its affiliates). As a result, our success
is dependent in part on the continued success of Marriott and Hilton and their respective brands (or the brands of their
affiliates). We believe that building brand value is critical to increase demand and build customer loyalty. Consequently, if
market recognition or the positive perception of Marriott and/or Hilton is reduced or compromised, the goodwill associated with
the Marriott- and Hilton-branded hotels in our portfolio may be adversely affected. Furthermore, if our relationship with
Marriott or Hilton were to deteriorate as a result of disputes regarding the management of our hotels or for other reasons,
Marriott and/or Hilton might terminate its current management agreements or franchise licenses with us or decline to manage or
provide franchise licenses for hotels we may acquire in the future.
If we cannot obtain additional capital, our growth will be limited.
We are required to distribute to our stockholders at least 90% of our REIT taxable income, excluding net capital gains, each
year to qualify and maintain our qualification as a REIT. As a result, our retained earnings, if any, available to fund
acquisitions, development, or other capital expenditures are nominal. As such, we rely upon the availability of additional debt
or equity capital to fund these activities. Our long-term ability to grow through acquisitions or development, which is an
important strategy for us, will be limited if we cannot obtain additional financing or equity capital. Market conditions may make
it difficult to obtain financing or equity capital, and we may not be able to obtain additional debt or equity financing or obtain it
on favorable terms. Also, see the risk factor, “As a result of the impact of the COVID-19 pandemic, our ability to continue to
have the liquidity necessary to service our debt, meet contractual payment obligations under our loan and forbearance
agreements and fund our operations depends on many factors and we are unable to estimate future financial performance with
certainty.”
55
Some of our hotels are subject to ground leases; if we are found to be in breach of a ground lease or are unable to renew a
ground lease, our business could be materially and adversely affected.
Some of our hotels are on land subject to ground leases, two of which cover the entire property. Accordingly, we only own
a long-term leasehold or similar interest, rather than a fee interest, in those two hotels. We may not continue to make payments
due on our ground leases, particularly in light of the downturn in our business occasioned by COVID-19. If we fail to make a
payment on a ground lease or are otherwise found to be in breach of a ground lease, we could lose the right to use the hotel or
the portion of the hotel property that is subject to the ground lease. In addition, unless we can purchase the fee simple interest in
the underlying land and improvements, or extend the terms of these ground leases before their expiration, we will lose our right
to operate these properties and our interest in the improvements upon expiration of the ground leases. We may not be able to
renew any ground lease upon its expiration, of if renewed, the terms may not be favorable. Our ability to exercise any extension
options relating to our ground leases is subject to the condition that we are not in default under the terms of the ground lease at
the time we exercise such options. If we lose the right to use a hotel due to a breach or non-renewal of the ground lease, we
would be unable to derive income from such hotel and would need to purchase an interest in another hotel to attempt to replace
that income, which could materially and adversely affect our business, operating results and prospects. Our ability to refinance a
hotel property subject to a ground lease may be negatively impacted as the ground lease expiration date approaches.
In any eminent domain proceeding with respect to a hotel, we will not recognize any increase in the value of the land or
improvements subject to our ground leases or at expiration and may only receive a portion of compensation paid.
Unless we purchase a fee interest in the land and improvements subject to our ground leases, we will not have any
economic interest in the land or improvements at the expiration of our ground leases. As a result, we will not share in any
increase in value of the land or improvements beyond the term of a ground lease, notwithstanding our capital outlay to purchase
our interest in the hotel or fund improvements thereon, and will lose our right to use the hotel. Furthermore, if the state or
federal government seizes a hotel subject to a ground lease under its eminent domain power, we may only be entitled to a
portion of any compensation awarded for the seizure.
The expansion of our business into new markets outside of the United States will expose us to risks relating to owning
hotels in those international markets.
As part of our business strategy, we may acquire hotels that meet our investment criteria and are located in international
markets. We may have difficulty managing our expansion into new geographic markets where we have limited knowledge and
understanding of the local economy, an absence of business relationships in the area, or unfamiliarity with local governmental
and permitting procedures and regulations. There are risks inherent in conducting business outside of the United States, which
include risks related to:
•
•
•
•
•
•
•
•
•
foreign employment laws and practices, which may increase the reimbursable costs incurred under our advisory
agreement associated with international employees;
foreign tax laws, which may provide for income or other taxes or tax rates that exceed those of the U.S. and which may
provide that foreign earnings that are repatriated, directly or indirectly, are subject to dividend withholding tax
requirements or other restrictions;
compliance with and unexpected changes in regulatory requirements or monetary policy;
the willingness of domestic or international lenders to provide financing and changes in the availability, cost and terms
of such financing;
adverse changes in local, political, economic and market conditions;
increased costs of insurance coverage related to terrorist events;
changes in interest rates and/or currency exchange rates;
regulations regarding the incurrence of debt; and
difficulties in complying with U.S. rules governing REITs while operating outside of the United States.
Any of these factors could affect adversely our ability to obtain all of the intended benefits of expanding internationally. If
we do not effectively manage this expansion and successfully integrate the international hotels into our organization, our
operating results and financial condition may be adversely affected.
Compliance with international laws and regulations may require us to incur substantial costs.
The operations of our international properties, if any, will be subject to a variety of U.S. and international laws and
regulations, including the United States Foreign Corrupt Practices Act (“FCPA”). Before we invest in international markets, we
will adopt policies and procedures designed to promote compliance with the FCPA and other anti-corruption laws, but we may
56
not continue to be found to be operating in compliance with, or be able to detect violations of, any such laws or regulations. In
addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international properties
might be subject and the manner in which existing laws might be administered or interpreted.
Exchange rate fluctuations could adversely affect our financial results.
If we acquire hotels or conduct operations in an international jurisdiction, currency exchange rate fluctuations could
adversely affect our results of operations and financial position. If we have international operations, a portion of our revenue
and expenses could be generated in foreign currencies such as the Euro, the Canadian dollar and the British pound sterling. Any
steps we take to reduce our exposure to fluctuations in the value of foreign currencies, such as entering into foreign exchange
agreements or currency exchange hedging arrangements will not eliminate such risk entirely. To the extent that we are unable to
match revenue received in foreign currencies with expenses paid in the same currency, exchange rate fluctuations could have a
negative impact on our results of operations and financial condition. Additionally, because our consolidated financial results are
reported in U.S. dollars, if we generate revenues or earnings in other currencies, the conversion of such amounts into U.S.
dollars can result in an increase or decrease in the amount of our revenues or earnings.
We are increasingly dependent on information technology, and potential cyber-attacks, security problems or other
disruption and expanding social media vehicles present new risks.
Ashford LLC and our hotel managers rely on information technology networks and systems, including the Internet, to
process, transmit and store electronic information, and to manage or support a variety of business processes, including financial
transactions and records, personal identifying information, reservations, billing and operating data. The collection and use of
personally identifiable information is governed by federal and state laws and regulations. Privacy and information security laws
continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with all such laws and regulations
may increase the Company’s operating costs and adversely impact the Company’s ability to market the Company’s properties
and services.
Ashford LLC and our hotel managers may purchase some of our information technology from vendors, on whom our
systems will depend, and Ashford LLC relies on commercially available systems, software, tools and monitoring to provide
security for processing, transmission and storage of confidential operator and other customer information. We depend upon the
secure transmission of this information over public networks. Ashford LLC’s and hotel managers’ networks and storage
applications could be subject to unauthorized access by hackers or others through cyber-attacks, which are rapidly evolving and
becoming increasingly sophisticated, or by other means, or may be breached due to operator error, malfeasance or other system
disruptions. Privacy and information security risks have generally increased in recent years because of the proliferation of new
technologies, such as ransomware, and the increased sophistication and activities of perpetrators of cyber-attacks. In light of the
increased risks, including due to the increased remote access associated with work-from-home arrangements as a result of the
COVID-19 pandemic. Ashford LLC has dedicated additional resources on our behalf to strengthen the security of our computer
systems. In the future, Ashford LLC may expend additional resources on our behalf to continue to enhance our information
security measures and/or to investigate and remediate any information security vulnerabilities. Despite these steps, there can be
no assurance that we will not suffer a significant data security incident in the future, that unauthorized parties will not gain
access to sensitive data stored on our systems or that any such incident will be discovered in a timely manner.
In addition, the use of social media could cause us to suffer brand damage or information leakage. Negative posts or
comments about us, our hotel managers or our hotels on any social networking website could damage our or our hotels’
reputations. In addition, employees or others might disclose non-public sensitive information relating to our business through
external media channels. The continuing evolution of social media will present us with new challenges and risks.
We may experience losses caused by severe weather conditions or natural disasters.
Our properties are susceptible to extreme weather conditions, which may cause property damage or interrupt business,
which could harm our business and results of operations. Certain of our hotels are located in areas that may be subject to
extreme weather conditions, including, but not limited to, hurricanes, floods, tornados and winter storms in the United States
and the Caribbean. Such extreme weather conditions may interrupt our operations, damage our hotels, and reduce the number of
guests who visit our hotels in such areas. In addition, our operations could be adversely impacted by a drought or other cause of
water shortage. A severe drought of extensive duration experienced in California or in the other regions in which we operate or
source critical supplies could adversely affect our business. Over time, these conditions could result in declining hotel demand,
significant damage to our properties or our inability to operate the affected hotels at all.
We believe that our properties are adequately insured, consistent with industry standards, to cover reasonably anticipated
losses that may be caused by hurricanes, earthquakes, tornados, floods and other severe weather conditions and natural
57
disasters. Nevertheless, we are subject to the risk that such insurance will not fully cover all losses and, depending on the
severity of the event and the impact on our properties, such insurance may not cover a significant portion of the losses including
but not limited to the costs associated with evacuation. These losses may lead to an increase in our cost of insurance, a decrease
in our anticipated revenues from an affected property or a loss of all or a portion of the capital we have invested in an affected
property. In addition, we may not purchase insurance under certain circumstances if the cost of insurance exceeds, in our
judgment, the value of the coverage relative to the risk of loss.
Changes in laws, regulations or policies may adversely affect our business.
The laws and regulations governing our business or the regulatory or enforcement environment at the federal level or in
any of the states in which we operate may change at any time and may have an adverse effect on our business. We are unable to
predict how this or any other future legislative or regulatory proposals or programs will be administered or implemented or in
what form, or whether any additional or similar changes to statutes or regulations, including the interpretation or
implementation thereof, will occur in the future. Any such action could affect us in substantial and unpredictable ways and
could have an adverse effect on our results of operations and financial condition. Our inability to remain in compliance with
regulatory requirements in a particular jurisdiction could have a material adverse effect on our operations in that market and on
our reputation generally. Applicable laws or regulations may be amended or construed differently and new laws and regulations
may be adopted, either of which could materially adversely affect our business, financial condition, or results of operations.
We may from time to time be subject to litigation, which could have a material adverse effect on our financial condition,
results of operations, cash flow and trading price of our common stock.
We may from time to time be subject to litigation. Some of these claims may result in defense costs, settlements, fines or
judgments against us, some of which may not be covered by insurance. Payment of any such costs, settlements, fines or
judgments that are not insured could have a material adverse impact on our financial position and results of operations.
Negative publicity regarding claims or judgments made against us or involving our hotels may damage our, or our hotels’,
reputations. In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our
insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that
would be uninsured, and/or adversely impact our ability to attract officers and directors.
A class action lawsuit has been filed against one of the Company’s hotel management companies alleging violations of
certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company. For more
information, see “Item 3. Legal Proceedings.”
Risks Related to our Debt Financing
We have a significant amount of debt, and our organizational documents have no limitation on the amount of additional
indebtedness that we may incur in the future.
As of December 31, 2021, we had approximately $1.2 billion of outstanding indebtedness, including approximately $1.1
billion of variable interest rate debt, and we expect to incur additional indebtedness, including additional variable-rate debt. In
the future, we may incur additional indebtedness to finance future hotel acquisitions, capital improvements and development
activities and other corporate purposes.
A substantial level of indebtedness could have adverse consequences for our business, results of operations and financial
position because it could, among other things:
•
•
•
•
require us to dedicate a substantial portion of our cash flow from operations to make principal and interest payments
on our indebtedness, thereby reducing our cash flow available to fund working capital, capital expenditures and other
general corporate purposes, including to pay dividends on our common stock and our preferred stock as currently
contemplated or necessary to satisfy the requirements for qualification as a REIT;
increase our vulnerability to general adverse economic and industry conditions and limit our flexibility in planning for,
or reacting to, changes in our business and our industry;
limit our ability to borrow additional funds or refinance indebtedness on favorable terms or at all to expand our
business or ease liquidity constraints; and
place us at a competitive disadvantage relative to competitors that have less indebtedness.
Our charter and bylaws do not limit the amount or percentage of indebtedness that we may incur, and we are subject to
risks normally associated with debt financing. Generally, our mortgage debt carries maturity dates or call dates such that the
loans become due prior to their full amortization. It may be difficult to refinance or extend the maturity of such loans on terms
acceptable to us, or at all. These conditions could adversely affect our financial position, results of operations, and cash flows or
the market price of our stock.
58
Under our advisory agreement, Ashford LLC is entitled to receive a monthly base fee in an amount equal to 1/12th of the
sum of (i) 0.70% of the total market capitalization of our company for the prior month, and (ii) the Net Asset Fee Adjustment,
which is defined in the advisory agreement to include our indebtedness and other factors. This fee increases as the aggregate
principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not
consolidated but excluding our joint venture partners’ proportionate share of consolidated debt) increases. As a result, any
increase in our consolidated indebtedness will also increase the fees we pay to Ashford LLC. The structure of this fee may
incentivize Ashford LLC to recommend we increase our indebtedness, thereby increasing the fee, when it may not be in the best
interest of our stockholders to do so.
In addition, changes in economic conditions, our financial condition or operating results or prospects could:
•
•
•
•
result in higher interest rates on our variable-rate debt,
reduce the availability of debt financing generally or debt financing at favorable rates,
reduce cash available for distribution to stockholders, or
increase the risk that we could be forced to liquidate assets to repay debt.
Increases in interest rates could increase our debt payments.
As of December 31, 2021, we had approximately $1.2 billion of outstanding indebtedness, including approximately $1.1
billion of variable interest rate debt, and we expect to incur additional indebtedness, including additional variable-rate debt.
Increases in interest rates increase our interest costs on our variable-rate debt and could increase interest expense on any future
fixed rate debt we may incur, and interest we pay reduces our cash available for distributions, expansion, working capital and
other uses. Moreover, periods of rising interest rates heighten the risks described immediately above under “We have a
significant amount of debt, and our organizational documents have no limitation on the amount of additional indebtedness that
we may incur in the future.”
We may enter into other transactions that could further exacerbate the risks to our financial condition. The use of debt to
finance future acquisitions could restrict operations, inhibit our ability to grow our business and revenues, and negatively
affect our business and financial results.
We intend to incur additional debt in connection with future hotel acquisitions. We may borrow new funds to acquire
hotels. In addition, we may incur mortgage debt by obtaining loans secured by a portfolio of some or all of the hotels that we
own or acquire. If necessary or advisable, we also may borrow funds to make distributions to our stockholders to maintain our
qualification as a REIT for U.S. federal income tax purposes. To the extent that we incur debt in the future and do not have
sufficient funds to repay such debt at maturity, it may be necessary to refinance the debt through debt or equity financings,
which may not be available on acceptable terms or at all and which could be dilutive to our stockholders. If we are unable to
refinance our debt on acceptable terms or at all, we may be forced to dispose of hotels at inopportune times or on
disadvantageous terms, which could result in losses. To the extent we cannot meet our future debt service obligations, we will
risk losing to foreclosure some or all of our hotels that may be pledged to secure our obligation.
Covenants, “cash trap” provisions or other terms in our mortgage loans and our senior convertible notes, as well as any
future credit facility, could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.
Some of our loan agreements contain financial and other covenants. If we violate covenants in any debt agreements, 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. Violations of certain debt covenants may also prohibit us from
borrowing unused amounts under our lines of credit, even if repayment of some or all the borrowings is not required. In
addition, financial covenants under our current or future debt obligations could impair our planned business strategies by
limiting our ability to borrow beyond certain amounts or for certain purposes.
Some of our loan agreements also contain cash trap provisions that are triggered if the performance of our hotels decline.
When these provisions are triggered, substantially all of the profit generated by our hotels is deposited directly into lockbox
accounts and then swept into cash management accounts for the benefit of our various lenders. Cash is not distributed to us at
any time after the cash trap provisions have been triggered until we have cured performance issues. This could affect our
liquidity and our ability to make distributions to our stockholders. If we are not able to make distributions to our stockholders,
we may not qualify as a REIT.
There is refinancing risk associated with our debt.
We finance our long-term growth and liquidity needs with, among other things, secured and unsecured debt financings
having staggered maturities, and use variable-rate debt or a mix of fixed and variable-rate debt as appropriate based on
favorable interest rates, principal amortization and other terms. In the event that we do not have sufficient funds to repay the
59
debt at the maturity of these loans, we will need to refinance this debt. If the credit environment is constrained at the time of our
debt maturities, we would have a very difficult time refinancing debt. When we refinance our debt, prevailing interest rates and
other factors may result in paying a greater amount of debt service, which will adversely affect our cash flow, and,
consequently, our cash available for distribution to our stockholders. If we are unable to refinance our debt on acceptable terms,
we may be forced to choose from a number of unfavorable options. These options include agreeing to otherwise unfavorable
financing terms on one or more of our unencumbered assets, selling one or more hotels on disadvantageous terms, including
unattractive prices or defaulting on the mortgage and permitting the lender to foreclose. Any one of these options could have a
material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our
stockholders.
Our hedging strategies may not be successful in mitigating our risks associated with interest rates and could reduce the
overall returns on an investment in our Company.
We may use various financial instruments, including derivatives, to provide a level of protection against interest rate
increases and other risks, but no hedging strategy can protect us completely. These instruments, such as the risk that the
counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in
reducing our exposure to interest rate changes or other risks and that a court could rule that such agreements are not legally
enforceable. These instruments may also generate income that may not be treated as qualifying REIT income. In addition, the
nature and timing of hedging transactions may influence the effectiveness of our hedging strategies. Poorly designed strategies
or improperly executed transactions could actually increase our risk and losses. Moreover, hedging strategies involve
transaction and other costs. We cannot assure you that our hedging strategy and the instruments that we use will not adequately
offset the risk of interest rate volatility or other risks or that our hedging transactions will not result in losses that may reduce
the overall return on your investment.
We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the
transition away from LIBOR to use of alternative reference rates.
In July 2017, the United Kingdom regulator that regulates London Interbank Offered Rate (“LIBOR”) announced its
intention to phase out LIBOR rates by the end of 2021. On March 5, 2021, the ICE Benchmark Administration Limited, the
administrator of LIBOR, and the Financial Conduct Authority announced that all LIBOR rates will either cease to be published
by any benchmark administrator, or no longer be representative immediately after December 31, 2021 for all GBP, EUR, CHF
and JPY LIBOR rates and one-week and two-month U.S. dollar LIBOR rates, and immediately after June 30, 2023 for the
remaining U.S. dollar LIBOR rates. As of January 1, 2022, publication of one-week and two-month U.S. dollar LIBOR has
ceased, and regulated U.S. financial institutions are no longer permitted to enter into new contracts referencing any LIBOR
rates. The Alternative Reference Rates Committee (“ARRC”), a committee convened by the Federal Reserve Board and the
New York Federal Reserve Bank, has proposed replacing U.S. dollar LIBOR with a new index based on trading in overnight
repurchase agreements, the Secured Overnight Financing Rate (“SOFR”). The ARRC has formally announced and
recommended SOFR as an alternative reference rate to LIBOR. As of December 31, 2021, we had approximately $1.1 billion of
variable interest rate debt as well as interest rate derivatives including caps on the majority of our variable rate debt that are
indexed to LIBOR.
At this time we are not able to accurately predict when SOFR will become the most prevalent alternative reference rate in
the market, or what impact the transition from LIBOR to alternative reference rates may have on our business, results of
operations and financial condition. Additionally, it is difficult to predict whether and to what extent banks will continue to
provide submissions to the administrator of rate quotes for the U.S. dollar LIBOR rates that have not already been discontinued
or, if they do, whether such rates will be representative of the underlying market or economic reality before they are schedule to
be discontinued on June 30, 2023 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or
elsewhere. If a published U.S. dollar LIBOR rate is unavailable after 2021, the interest rates on our debt which is indexed to
LIBOR will be determined using various alternative methods, any of which may result in interest obligations which are more
than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S. dollar LIBOR
was available in its current form. Further, the same costs and risks that may lead to the unavailability of U.S. dollar LIBOR may
make one or more of the alternative methods difficult or impracticable to determine. Our financial instruments may require
changes to documentation as well as enhancements and modifications to systems, controls, procedures and models, which could
present operational and legal challenges for us and our clients, customers, investors and counterparties. There can be no
assurance that we will be able to modify all existing financial instruments before the discontinuation of LIBOR. If such
financial instruments are not remediated to provide a method for transitioning from LIBOR to an alternative reference rate, the
New York state LIBOR legislation and proposed federal legislation related to the LIBOR transition may provide statutory
solutions to implement an alternative reference rate and provide legal protection against litigation. Any of these proposals or
consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating
60
results and cash flows. We continue to monitor developments in the LIBOR transition and the proposed federal legislation
related to the LIBOR transition to facilitate an orderly transition away from the use of LIBOR.
Risks Related to Conflicts of Interest
Our separation and distribution agreement, our advisory agreement, the original master hotel management agreement,
the original mutual exclusivity agreement and other agreements entered into in connection with the spin-off, as well as the
master project management agreement, the master hotel management agreement, the hotel management MEA and the
project management MEA entered into in connection with Ashford Inc.’s August 2018 acquisition of Premier and the ERFP
Agreement were not negotiated on an arm’s-length basis with an unaffiliated third party, and we may pursue less vigorous
enforcement of the terms of the current agreements because of conflicts of interest with certain of our executive officers and
directors and key employees of Ashford LLC.
Because our officers and the chairman of our board of directors are also key employees of Ashford LLC or its affiliates and
have ownership interests in Ashford Trust, our separation and distribution agreement, our advisory agreement, our original
master hotel management agreement, our original mutual exclusivity agreement and other agreements entered into in
connection with the spin-off were not negotiated on an arm’s-length basis, and we did not have the benefit of arm’s-length
negotiations of the type normally conducted with an unaffiliated third party. Due to the subsequent spin-off of Ashford Inc., the
parent company of Ashford LLC in November 2014, these officers and directors also have ownership interests in the parent
company of Ashford LLC and its subsidiaries. As a result of our affiliations with Ashford Trust, Ashford Inc. and its
subsidiaries (including Ashford LLC, Remington Hotels and Premier), the terms, including fees and other amounts payable, of
agreements between us and Ashford Trust, Ashford LLC or Remington Hotels, including our master hotel management
agreement and hotel management MEA with Remington Hotels and our master project management agreement and project
management MEA with Premier, may not be as favorable to us as the terms under an arm’s-length agreement. Furthermore, we
may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain
our ongoing relationship with Ashford Trust and Ashford LLC.
Ashford LLC may also manage other entities or assets in the future. Our officers and certain of our directors may also be
key officers or directors of such future entities or their affiliates and may have ownership interests in such entities. Any such
positions or interests could present additional conflicts of interest for our officers and certain of our directors.
Ashford LLC was a subsidiary of Ashford Trust until its spin-off and may be able to direct attractive investment
opportunities to Ashford Trust and away from us.
Until its spin-off on November 12, 2014, Ashford LLC was a subsidiary of Ashford Trust, a publicly-traded hotel REIT,
with investment objectives that are similar to ours. So long as Ashford LLC is our external advisor, our governing documents
require us to include persons designated by Ashford LLC as candidates for election as director at any stockholder meeting at
which directors are to be elected, as described in our governing documents. Each of our executive officers and one of our
directors also serve as employees and/or officers of Ashford LLC. In addition each of our officers, other than Mr. Richard
Stockton, and one of our directors serve as officers and/or directors of Ashford Trust. Furthermore, Mr. Monty J. Bennett, our
previous chief executive officer and current chairman, is also the chairman of Ashford Trust and the chairman, chief executive
officer and a significant stockholder of Ashford Inc. Our advisory agreement requires Ashford LLC to present investments that
satisfy our investment guidelines to us before presenting them to Ashford Trust or any future client of Ashford LLC. Our board
may modify or supplement our investment guidelines from time to time so long as we do not change our investment guidelines
in such a way as to be directly competitive with all or any portion of Ashford Trust’s investment guidelines as of the date of the
advisory agreement. If we materially change our investment guidelines without the express consent of Ashford LLC, then
Ashford LLC will not have an obligation to present investment opportunities to us and instead Ashford LLC will use its best
judgment to allocate investment opportunities and other entities it advises, taking into account such factors as Ashford LLC
deems relevant, in its discretion, subject to any then-existing obligations of Ashford LLC to such other entities.
However, some portfolio investment opportunities may include hotels that satisfy our investment objectives as well as
hotels that satisfy the investment objectives of Ashford Trust or other entities advised by Ashford LLC. If the portfolio cannot
be equitably divided, Ashford LLC will necessarily have to make a determination as to which entity will be presented with the
opportunity. In such a circumstance, our advisory agreement requires Ashford LLC to allocate portfolio investment
opportunities between us and Ashford Trust or other entities advised by Ashford LLC in a fair and equitable manner, consistent
with our, Ashford Trust’s and such other entities’ investment objectives. In making this determination, Ashford LLC, using
substantial discretion, is required to consider the investment strategy and guidelines of each entity with respect to acquisition of
properties, portfolio concentrations, tax consequences, regulatory restrictions, liquidity requirements, leverage and other factors
deemed appropriate. In making the allocation determination, Ashford LLC has no obligation to make any such investment
opportunity available to us. Ashford LLC and Ashford Trust have agreed that any new investment opportunities that satisfy our
61
investment guidelines will be presented to our board of directors; however, our board will have only ten business days to make
a determination with respect to such opportunity prior to it being available to Ashford Trust. The above mentioned dual
responsibilities may create conflicts of interest for our officers that could result in decisions or allocations of investments that
may benefit Ashford Trust more than they benefit our company, and Ashford Trust may compete with us with respect to certain
investments that we may want to acquire.
Ashford LLC and its employees, some of whom are our executive officers, face competing demands relating to their time
and this may adversely affect our operations.
We rely on Ashford LLC, its subsidiaries and its employees for the day-to-day operation of our business and management
of our assets and the provision of design and construction services. Until its spin-off, Ashford LLC was wholly-owned by
Ashford Trust. Ashford LLC is led by our current management team, which is also the current management team of Ashford
Trust (in each case, other than Mr. Richard Stockton). Because some of Ashford LLC’s employees have duties to Ashford Trust
as well as to our company, we do not have their undivided attention and they face conflicts in allocating their time and
resources between our company, Ashford Inc. and Ashford Trust. If Ashford LLC advises and/or leads any additional entities,
or manages additional assets, in the future, this could present additional conflicts with respect to the allocation of the time and
resources of our management team. As a result of the spin-off of Ashford LLC, its employees have additional responsibilities
relating to Ashford Inc.’s status as a public company. During turbulent market conditions, such as during the COVID-19
pandemic, or other times when we need focused support and assistance from Ashford LLC, other entities for which Ashford
LLC also acts as an external advisor or Ashford Trust may likewise require greater focus and attention, placing competing high
levels of demand on the limited time and resources of Ashford LLC’s employees. We may not receive the necessary support
and assistance we require or would otherwise receive if we were internally managed by persons working exclusively for us.
We provide funds to Ashford Inc. to fund the formation, registration and ongoing funding needs of Ashford Securities,
which could result in certain conflicts of interest. There can be no assurance Ashford Securities will continue to be
successful in helping us raise capital.
In connection with the formation of Ashford Securities by Ashford Inc. in September of 2019, we and Ashford Trust
entered into a contribution agreement to provide funds to Ashford Inc. to fund the formation, registration and ongoing funding
requirements of Ashford Securities. As a result, Ashford Securities’ operation and management may be influenced or affected
by conflicts of interest arising out of its relationship with us, and Ashford Trust. Additionally, the agreements between us and
our related parties, including Ashford Securities, may not be arm's-length agreements and may not be as favorable to our
investors as would be the case if the parties were operating at arm’s-length. There can be no assurance that Ashford Securities
will continue to be successful in helping us to raise capital.
Conflicts of interest with Remington Hotels and Premier, each of which is a subsidiary of Ashford Inc., could result in our
management acting other than in our stockholders’ best interest.
Remington Hotels, a subsidiary of Ashford Inc., currently manages the Pier House Resort & Spa, the Bardessono Hotel and
Spa, Hotel Yountville and Mr. C Beverly Hills Hotel. We expect Remington Hotels will manage certain of the hotels we
acquire in the future. Premier, also a subsidiary of Ashford Inc., currently provides design and construction services to us. We
expect Premier will also provide design and construction services to us in the future. Conflicts of interest in general and
specifically relating to Remington Hotels and Premier may lead to management decisions that are not in our stockholders’ best
interest. Mr. Monty J. Bennett and Mr. Archie Bennett, Jr., beneficially owned 100% of Remington Lodging prior to its
acquisition by Ashford Inc. on November 6, 2019. As of December 31, 2021, Mr. Monty J. Bennett, chairman of our board of
directors and chairman, chief executive officer and a significant stockholder of Ashford Inc. and Mr. Archie Bennett, Jr.
together owned approximately 610,246 shares of Ashford Inc. common stock, which represented an approximate 20.2%
ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc. Series D Convertible Preferred Stock, which
was exercisable (at an exercise price of $117.50 per share) into an additional approximate 3,991,191 shares of Ashford Inc.
common stock, which if exercised as of December 31, 2021 would have increased the Bennetts’ ownership interest in Ashford
Inc. to 65.6%, subject to applicable voting limitations. The 18,758,600 shares of Series D Convertible Preferred Stock owned
by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 360,000 shares owned by trusts.
We have entered into a hotel management MEA and a master hotel management agreement with Remington Hotels and a
project management MEA and master project management agreement with Premier. To the extent we have the right or control
the right to direct such matters, the hotel management MEA requires us to engage Remington Hotels to provide, under the
master hotel management agreement, hotel management services for all future properties that we acquire, unless our
independent directors either (i) unanimously vote not to hire Remington Hotels, or (ii) based on special circumstances or past
performance, by a majority vote, elect not to engage Remington Hotels because they have determined, in their reasonable
business judgment, that it would be in our best interest not to engage Remington Hotels or that another manager or developer
62
could perform the duties materially better. The project management MEA and master project management agreement with
Premier contains similar provisions. A beneficial owner of a significant position in Ashford Inc. would receive (through
Premier) any project management and termination fees payable by us under the master project management agreement.
Mr. Monty J. Bennett may influence our decisions to sell, acquire, or develop hotels when it is not in the best interest of our
stockholders to do so.
Mr. Monty J. Bennett’s ownership interests in and management obligations to Ashford Inc. present him with conflicts of
interest in making management decisions related to the commercial arrangements between us and Ashford Inc., and his
management obligations to Ashford Inc. reduce the time and effort he spends overseeing our company. Our board of directors
has adopted a policy that requires all material approvals, actions or decisions which we have the right to make under the master
hotel management agreement with Remington Hotels and the master project management agreement with Premier be approved
by a majority or, in certain circumstances, all, of our independent directors. However, given the authority and/or operational
latitude provided to Remington Hotels under the master hotel management agreement and to Premier under the master project
management agreement, Mr. Monty J. Bennett, as the chairman and chief executive officer of Ashford Inc., could take actions
or make decisions that are not in our stockholders’ best interest or that are otherwise inconsistent with his obligations to us
under the master hotel management agreement or our obligations under the applicable franchise agreements or his obligations to
us under the master project management agreement.
Ashford Inc.’s ability to exercise significant influence over the determination of the competitive set for any hotels
managed by Remington Hotels could artificially enhance the perception of the performance of a hotel, making it more
difficult to use managers other than Remington Hotels for future properties.
Under our master hotel management agreement with Remington Hotels, we have the right to terminate Remington Hotels
based on the performance of the applicable hotel, subject to the payment of a termination fee. The determination of performance
is based on the applicable hotel’s gross operating profit margin and its RevPAR penetration index, which provides the relative
revenue per room generated by a specified property as compared to its competitive set. For each hotel managed by Remington
Hotels, its competitive set consists of a small group of hotels in the relevant market that we and Remington Hotels believe are
comparable for purposes of benchmarking the performance of such hotel. Ashford Inc. has significant influence over the
determination of the competitive set for any of our hotels that it manages. Ashford Inc. could artificially enhance the perception
of the performance of a hotel by selecting a competitive set that is not performing well or is not comparable to the Remington
Hotels-managed hotel, thereby making it more difficult for us to elect not to use Remington Hotels for future hotel
management.
Remington Hotels may be able to pursue lodging investment opportunities that compete with us.
Pursuant to the terms of our hotel management MEA with Remington Hotels, if investment opportunities that satisfy our
investment criteria are identified by Remington Hotels or its affiliates, Remington Hotels will give us a written notice and
description of the investment opportunity. We will have 10 business days to either accept or reject the investment opportunity.
If we reject the opportunity, Remington Hotels may then pursue such investment opportunity, subject to a right of first refusal
in favor of Ashford Trust pursuant to an existing agreement between Ashford Trust and Remington Hotels, on materially the
same terms and conditions as offered to us. If we reject such an investment opportunity, either Ashford Trust or Remington
Hotels could pursue the opportunity and compete with us. In such a case, Mr. Monty J. Bennett, chairman of our board, in his
capacity as chairman and chief executive officer of Ashford Trust could be in a position of directly competing with us, and
Remington Hotels may compete with us with respect to certain investments that we may want to acquire.
Our fiduciary duties as the general partner of our operating partnership could create conflicts of interest, which may
impede business decisions that could benefit our stockholders.
As the general partner of our operating partnership, we have fiduciary duties to the other limited partners in our operating
partnership, the discharge of which may conflict with the interests of our stockholders. The limited partners of our operating
partnership have agreed that, in the event of a conflict in the fiduciary duties owed by us to our stockholders and, in our
capacity as general partner of our operating partnership, to such limited partners, we are under no obligation to give priority to
the interests of such limited partners. In addition, persons holding common units have the right to vote on certain amendments
to the operating partnership agreement (which require approval by a majority in interest of the limited partners, including us)
and individually to approve certain amendments that would adversely affect their rights. These voting rights may be exercised
in a manner that conflicts with the interests of our stockholders. For example, we cannot modify the rights of limited partners to
receive distributions as set forth in the operating partnership agreement in a manner that adversely affects their rights without
their consent, even though such modification might be in the best interest of our stockholders.
63
In addition, conflicts may arise when the interests of our stockholders and the limited partners of our operating partnership
diverge, particularly in circumstances in which there may be an adverse tax consequence to the limited partners. As a result of
unrealized built-in gain attributable to contributed property at the time of contribution, some holders of common units may
suffer different and more adverse tax consequences than holders of our common stock upon the sale or refinancing of the
properties owned by our operating partnership, including disproportionately greater allocations of items of taxable income and
gain upon a realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they
may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of
certain properties, or whether to sell or refinance such properties at all. As a result, Ashford LLC may cause us to sell, not sell
or refinance certain properties, even if such actions or inactions might be financially advantageous to our stockholders, or to
enter into tax deferred exchanges with the proceeds of such sales when such a reinvestment might not otherwise be in our best
interest.
Our conflicts of interest policy may not adequately address all of the conflicts of interest that may arise with respect to our
activities.
We have adopted a conflicts of interest policy to address specifically some of the conflicts relating to our activities which
requires the approval of a majority of our disinterested directors to approve any transaction, agreement or relationship in which
any of our directors or officers, Ashford LLC or its employees or Ashford Trust has an interest. In connection with this policy,
our board of directors has established a Related Party Transactions Committee (consisting of Messrs. Fearn and Rinaldi and Ms.
Carter), which is empowered to deny a new proposed interested party transaction or recommend the transaction for approval by
a majority of the independent directors. Our policies, however may not be adequate to address all of the conflicts that may arise.
In addition, it may not address such conflicts in a manner that is favorable to us.
The potential for conflicts of interest as a result of our management structure may provoke dissident stockholder activities
that result in significant costs.
Particularly following periods of volatility in the overall market or declines in the market price of the company’s securities,
REITs, including us have been targets of stockholder litigation, stockholder director nominations and stockholder proposals by
dissident stockholders that allege conflicts of interest in business dealings with affiliated and related persons and entities. Our
relationships with Ashford LLC, Ashford Inc., Ashford Trust, the other businesses and entities to which Ashford LLC and
Ashford Inc. provide management or other services, Mr. Monty J. Bennett, Mr. Archie Bennett, Jr. and with other related
parties of Ashford Inc. and Ashford Trust may precipitate such activities. These activities, if instituted against us, could result in
substantial costs and a diversion of our management’s attention even if the action is unfounded.
Responding to actions by activist investors can be costly and time-consuming, disrupting our operations and diverting the
attention of management and our employees. Stockholder activism could create perceived uncertainties as to our future
direction, which could result in the loss of potential business opportunities and make it more difficult for our advisor to attract
and retain qualified personnel and business partners. Furthermore, the election of individuals to our board of directors with a
specific agenda could adversely affect our ability to effectively and timely implement our strategic plans.
Risks Related to Hotel Investments
We are subject to general risks associated with operating hotels.
We own hotel properties, which have different economic characteristics than many other real estate assets and a hotel REIT
is structured differently than many other types of REITs. A typical office property, for example, has long-term leases with third-
party tenants, which provides a relatively stable long-term stream of revenue. Hotels, on the other hand, generate revenue from
guests that typically stay at the hotel for only a few nights, which causes the room rate and occupancy levels at each of our
hotels to change every day, and results in earnings that can be highly volatile. In addition, our hotels are subject to various
operating risks common to the hotel industry, many of which are beyond our control, and are discussed in more detail below.
The outbreak of COVID-19 has and will continue to reduce our occupancy rates and RevPAR.
Despite recent progress in the administration of vaccines, both the outbreak of recent variants, including Delta and
Omicron, and the related containment and mitigation measures that have been put into place across the globe, have had and are
likely to continue to have a serious adverse impact on the global economy and our business, the severity and duration of which
are uncertain. Since late February 2020, we have experienced a significant decline in occupancy and RevPAR and we expect
the occupancy and RevPAR reduction associated with COVID-19 to continue. The continued outbreak of the virus in the U.S.
has and will continue to further reduce travel and demand at our hotels. The prolonged occurrence of the virus has resulted in
health or other government authorities imposing widespread restrictions on travel or other market impacts. The hotel industry
and our portfolio have and we expect will continue to experience the postponement or cancellation of a significant number of
64
business conferences and similar events. At this time those restrictions are very fluid and evolving. We have been and will
continue to be negatively impacted by those restrictions. Given that the type, degree and length of such restrictions are not
known at this time, we cannot predict the overall impact of such restrictions on us or the overall economic environment. In
addition, one or more possible recurrences of COVID-19 case surges could result in further reductions in business and personal
travel and could cause state and local governments to reinstate travel restrictions. We may also face increased risk of litigation
if we have guests or employees who become ill due to COVID-19.
As such, the full impact these restrictions may have on our financial position, operating results and liquidity cannot be
reasonably estimated at this time, but the impact will be material. Additionally, the public perception of a risk of a pandemic or
media coverage of these diseases, or public perception of health risks linked to perceived regional food and beverage safety has
materially adversely affected us by reducing demand for our hotels. These events have resulted in a sustained, significant drop
in demand for our hotels and could have a material adverse effect on us.
Declines in or disruptions to the travel industry could adversely affect our business and financial performance.
Our business and financial performance are affected by the health of the worldwide travel industry. Travel expenditures are
sensitive to personal and business-related discretionary spending levels, tending to decline or grow more slowly during
economic downturns, as well as to disruptions due to other factors, including those discussed below. Decreased travel
expenditures could reduce the demand for our services, thereby causing a reduction in revenue. For example, during regional or
global recessions, domestic and global economic conditions can deteriorate rapidly, resulting in increased unemployment and a
reduction in expenditures for both business and leisure travelers. A slower spending on the services we provide could have a
negative impact on our revenue growth.
Other factors that could negatively affect our business include: terrorist incidents and threats and associated heightened
travel security measures; political and regional strife; acts of God such as earthquakes, hurricanes, fires, floods, volcanoes and
other natural disasters; war; concerns with or threats of pandemics, contagious diseases or health epidemics, such as
COVID-19, Ebola, H1N1 influenza (swine flu), MERS, SARs, avian flu, the Zika virus or similar outbreaks; environmental
disasters; lengthy power outages; increased pricing, financial instability and capacity constraints of air carriers; airline job
actions and strikes; fluctuations in hotel supply, occupancy and ADR; changes to visa and immigration requirements or border
control policies; imposition of taxes or surcharges by regulatory authorities; and increases in gasoline and other fuel prices.
Because these events or concerns, and the full impact of their effects, are largely unpredictable, they can dramatically and
suddenly affect travel behavior by consumers and decrease demand. Any decrease in demand, depending on its scope and
duration, together with any future issues affecting travel safety, could significantly and adversely affect our business, working
capital and financial performance over the short and long-term. In addition, the disruption of the existing travel plans of a
significant number of travelers upon the occurrence of certain events, such as severe weather conditions, actual or threatened
terrorist activity, war or travel-related health events, could result in significant additional costs and decrease our revenues, in
each case, leading to constrained liquidity. Also, see the risk factor “The outbreak of COVID-19 has and will continue to reduce
our occupancy rates and RevPAR.”
We may have to make significant capital expenditures to maintain our hotel properties, and any development activities we
undertake may be more costly than we anticipate.
Our hotels have an ongoing need for renovations and other capital improvements, including replacements, from time to
time, of furniture, fixtures, and equipment. Managers or franchisors of our hotels also require that we make periodic capital
improvements pursuant to our management agreements or as a condition of maintaining franchise licenses. Generally, we are
responsible for the cost of these capital improvements. As part of our long-term growth strategy, we may also develop hotels.
Hotel renovation and development involves substantial risks, including:
•
•
•
•
•
•
construction cost overruns and delays;
the disruption of operations at, displacement of revenue at, and damage to operating hotels, including revenue lost
while rooms, restaurants or meeting space under renovation are out of service;
increases in operating costs at our hotels, to the extent they rely on portions of development sites for hotel operations;
the cost of funding renovations or developments and inability to obtain financing on attractive terms;
the return on our investment in these capital improvements or developments failing to meet expectations;
inability to obtain all necessary zoning, land use, building, occupancy, and construction permits;
65
•
•
•
•
loss of substantial investment in a development project if a project is abandoned before completion;
environmental problems;
disputes with franchisors or hotel managers regarding compliance with relevant franchise agreements or management
agreements: and
development related liabilities, such as claims for design/construction defects.
If we have insufficient cash flow from operations to fund needed capital expenditures, then we will need to borrow, sell
assets or sell additional equity securities to fund future capital improvements.
The hotel business is seasonal, which affects our results of operations from quarter to quarter.
The hotel industry is seasonal in nature. This seasonality can cause quarterly fluctuations in our financial condition and
operating results, including in the amount available for distributions on our common stock. Our quarterly operating results may
be adversely affected by factors outside our control, including weather conditions and poor economic factors in certain markets
in which we operate. Our cash flows may not be sufficient to offset any shortfalls that occur as a result of these fluctuations. As
a result, we may have to reduce distributions or enter into short-term borrowings in certain quarters in order to make
distributions to our stockholders. Such borrowings may not be available on favorable terms, if at all.
The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could have a
material adverse effect on our business and operating results.
The lodging industry historically has been highly cyclical in nature. Fluctuations in lodging demand and, therefore, hotel
operating performance, are caused largely by general economic and local market conditions, which subsequently affect levels of
business and leisure travel. In addition to general economic conditions, new hotel room supply is an important factor that can
affect the lodging industry’s performance, and overbuilding has the potential to further exacerbate the negative impact of an
economic recession. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply
growth. An adverse change in lodging fundamentals could result in returns that are substantially below our expectations or
result in losses, which could have a material adverse effect on our business and operating results.
Many of our real estate-related costs are fixed, and will not decrease even if revenue from our hotels decreases.
Many costs, such as real estate taxes, insurance premiums and maintenance costs, generally are not reduced even when a
hotel is not fully occupied, room rates decrease or other circumstances cause a reduction in revenues. In addition, newly
acquired or renovated hotels may not produce the revenues we anticipate immediately, or at all, and the hotel’s operating cash
flow may be insufficient to pay the operating expenses and debt service associated with these new hotels. If we are unable to
offset real estate costs with sufficient revenues across our portfolio, our operating results and our ability to make distributions to
our stockholders may be adversely affected.
The increasing use of Internet travel intermediaries by consumers may adversely affect our profitability.
Some of our hotel rooms are booked through Internet travel intermediaries, including, but not limited to, Tripadvisor.com,
Travelocity.com, Expedia.com and Priceline.com. As Internet bookings increase, these intermediaries may be able to obtain
higher commissions, reduced room rates or other significant contract concessions from our management companies. Moreover,
some of these Internet travel intermediaries are attempting to offer hotel rooms as a commodity, by increasing the importance of
price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. These
intermediaries hope that consumers will eventually develop brand loyalties to their reservations system rather than to the brands
under which our properties are franchised. If the amount of sales made through Internet intermediaries increases significantly
and results in a decrease in consumer loyalty to the brands under which our hotels are franchised, our rooms revenues may be
lower than expected, and our profitability may be adversely affected.
Our revenues and profitability may be adversely affected by increased use of business-related technology, which may
reduce the need for business-related travel.
The increased use of teleconference and video-conference technology by businesses could result in decreased business
travel as companies increase the use of technologies that allow multiple parties from different locations to participate at
meetings without traveling to a centralized meeting location. To the extent that such technologies play an increased role in day-
to-day business and the necessity for business-related travel decreases, hotel room demand may decrease and our revenues,
profitability and ability to make distributions to our stockholders may be adversely affected.
66
Future terrorist attacks or changes in terror alert levels could materially and adversely affect our business.
Previous terrorist attacks and subsequent terrorist alerts have adversely affected the U.S. travel and hospitality industries
since 2001, often disproportionately to the effect on the overall economy. The extent of the impact that actual or threatened
terrorist attacks in the U.S. or elsewhere could have on domestic and international travel and our business in particular cannot
be determined, but any such attacks or the threat of such attacks could have a material adverse effect on travel and hotel
demand, our ability to finance our business and our ability to insure our hotels. Any of these events could materially and
adversely affect our business, our operating results and our prospects.
We are subject to risks associated with the employment of hotel personnel, particularly with respect to hotels that employ
unionized labor.
Our managers, including Remington Hotels, a subsidiary of Ashford Inc., and unaffiliated third-party managers are
responsible for hiring and maintaining the labor force at each of our hotels. Although we do not directly employ or manage
employees at our hotels, we still are subject to many of the costs and risks generally associated with the hotel labor force,
particularly at those hotels with unionized labor. From time to time, hotel operations may be disrupted as a result of strikes,
lockouts, public demonstrations or other negative actions and publicity. We also may incur increased legal costs and indirect
labor costs as a result of contract disputes involving our managers and their labor force or other events. The resolution of labor
disputes or re-negotiated labor contracts could lead to increased labor costs, a significant component of our hotel operating
costs, either by increases in wages or benefits or by changes in work rules that raise hotel operating costs. We do not have the
ability to affect the outcome of these negotiations. Our third party managers may also be unable to hire quality personnel to
adequately staff hotel departments, which could result in a sub-standard level of service to hotel guests and hotel operations.
Hotels where our managers have collective bargaining agreements with their employees are more highly affected by labor
force activities than others. The resolution of labor disputes or re-negotiated labor contracts could lead to increased labor costs,
either by increases in wages or benefits or by changes in work rules that raise hotel operating costs. Furthermore, labor
agreements may limit the ability of our hotel managers to reduce the size of hotel workforces during an economic downturn
because collective bargaining agreements are negotiated between the hotel managers and labor unions. Our ability, if any, to
have any material impact on the outcome of these negotiations is restricted by and dependent on the individual management
agreement covering a specific property, and we may have little ability to control the outcome of these negotiations.
In addition, changes in labor laws may negatively impact us. For example, the implementation of new occupational health
and safety regulations, minimum wage laws, and overtime, working conditions, employment status and citizenship
requirements and the Department of Labor’s proposed regulations expanding the scope of non-exempt employees under the Fair
Labor Standards Act to increase the entitlement to overtime pay could significantly increase the cost of labor in the workforce,
which would increase the operating costs of our hotel properties and may have a material adverse effect on our business or
profitability.
Risks Related to the Real Estate Industry
Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the
performance of our hotel properties and harm our financial condition.
Because real estate investments are relatively illiquid, our ability to sell promptly one or more hotel properties for
reasonable prices in response to changing economic, financial, and investment conditions is limited.
We may decide to sell hotel properties in the future. We cannot predict whether we will be able to sell any hotel property
for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be
acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a hotel
property.
We may be required to expend funds to correct defects or to make improvements before a property can be sold. We may
not have funds available to correct those defects or to make those improvements. In addition, when we acquire a hotel property,
we may agree to lock-out provisions that materially restrict us from selling that property for a period of time or impose other
restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These and other factors
could impede our ability to respond to adverse changes in the performance of our hotel properties or a need for liquidity.
67
Increases in property taxes would increase our operating costs, reduce our income and adversely affect our ability to make
distributions to our stockholders.
Each of our hotel properties is subject to real and personal property taxes. These taxes may increase as tax rates change and
as the properties are assessed or reassessed by taxing authorities. If property taxes increase, our financial condition, results of
operations and our ability to make distributions to our stockholders could be materially and adversely affected and the market
price of our common stock could decline.
The costs of compliance with or liabilities under environmental laws may harm our operating results.
Operating expenses at our hotels could be higher than anticipated due to the cost of complying with existing or future
environmental laws and regulations. In addition, our hotel properties may be subject to environmental liabilities. An owner or
operator of real property can face liability for environmental contamination created by the presence or discharge of hazardous
substances on the property. We may face liability regardless of:
•
•
•
•
our knowledge of the contamination;
the timing of the contamination;
the cause of the contamination; or
the party responsible for the contamination.
There may be environmental problems associated with our hotel properties of which we are unaware. Some of our hotel
properties use, or may have used in the past, underground tanks for the storage of petroleum-based or waste products that could
create a potential for release of hazardous substances. If environmental contamination exists on a hotel property, we could
become subject to strict, joint and several liabilities for the contamination if we own the property.
The discovery of material environmental liabilities at our properties could subject us to unanticipated significant costs. The
presence of hazardous substances on a property may adversely affect our ability to sell the property on favorable terms or at all,
and we may incur substantial remediation costs.
Our environmental insurance policies may not provide sufficient coverage for any environmental liabilities at our
properties. In addition, if environmental liabilities are discovered during the underwriting of the insurance policies for any
property that we acquire in the future, we may be unable to obtain insurance coverage for the liabilities at commercially
reasonable rates or at all. We may experience losses as a result of any of these events.
Numerous treaties, laws and regulations have been enacted to regulate or limit carbon emissions. Changes in the
regulations and legislation relating to climate change, and complying with such laws and regulations, may require us to make
significant investments in our hotels and could result in increased energy costs at our properties.
Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of
remediating the problem.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the
moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or
irritants. Concern about indoor exposure to mold has been increasing as exposure to mold may cause a variety of adverse health
effects and symptoms, including allergic or other reactions. Some of the properties in our portfolio may contain microbial
matter such as mold and mildew. As a result, the presence of significant mold at any of our properties could require us to
undertake a costly remediation program to contain or remove the mold from the affected property. In addition, the presence of
significant mold could expose us to liability from hotel guests, hotel employees, and others if property damage or health
concerns arise.
Compliance with the ADA and fire, safety, and other regulations may require us to incur substantial costs.
All of our properties are required to comply with the ADA. The ADA requires that “public accommodations,” such as
hotels, be made accessible to people with disabilities. Compliance with the ADA’s requirements could require removal of
access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to
private litigants, or both. In addition, we are required to operate our properties in compliance with fire and safety regulations,
building codes, and other land use regulations as they may be adopted by governmental agencies and bodies and become
applicable to our properties. Any requirement to make substantial modifications to our hotel properties, whether to comply with
the ADA or other changes in governmental rules and regulations, could be costly.
68
We may experience uninsured or underinsured losses.
We maintain property and casualty insurance with respect to our hotel properties and other insurance, in each case, with
loss limits and coverage thresholds deemed reasonable by our management team (and to satisfy the requirements of lenders and
franchisors). In doing so, we make decisions with respect to what deductibles, policy limits, and terms are reasonable based on
management’s experience, our risk profile, the loss history of our hotel managers and our properties, the nature of our
properties and our businesses, our loss prevention efforts, and the cost of insurance.
Various types of catastrophic losses may not be insurable or may not be economically insurable. In the event of a
substantial loss, our insurance coverage may not cover the full current market value or replacement cost of our lost investment.
Inflation, changes in building codes and ordinances, environmental considerations, and other factors might cause insurance
proceeds to be insufficient to fully replace or renovate a hotel after it has been damaged or destroyed. Accordingly, it is possible
that:
•
•
•
•
the insurance coverage thresholds that we have obtained may not fully protect us against insurable losses (i.e., losses
may exceed coverage limits);
we may incur large deductibles that adversely affect our earnings;
we may incur losses from risks that are not insurable or that are not economically insurable; and
current coverage thresholds may not continue to be available at reasonable rates.
In the future, we may choose not to maintain terrorism insurance on any of our properties. As a result, one or more large
uninsured or underinsured losses could have a material adverse effect on our business, operating results and financial condition.
Each of our current lenders requires us to maintain certain insurance coverage thresholds. If a lender does not believe we
have complied with these requirements, the lender could obtain additional coverage thresholds and seek payment from us, or
declare us in default under the loan documents. In the former case, we could spend more for insurance than we otherwise deem
reasonable or necessary or, in the latter case, the hotels collateralizing one or more loans could be foreclosed upon. In addition,
a material casualty to one or more hotels collateralizing loans may result in the insurance company applying to the outstanding
loan balance insurance proceeds that otherwise would be available to repair the damage caused by the casualty, which would
require us to fund the repairs through other sources. The lender may also foreclose on the hotels if there is a material loss that is
not insured.
Risks Related to Investments in Securities
Our earnings are dependent, in part, upon the performance of our investment portfolio.
To the extent permitted by the Code, we may invest in and own securities of private companies, other public companies
and REITs. To the extent that the value of those investments declines or those investments do not provide an attractive return,
our earnings and cash flow could be adversely affected.
Our prior investment performance is not indicative of future results.
The performance of our prior investments is not necessarily indicative of the results that can be expected for the
investments to be made by our subsidiaries. On any given investment, total loss of the investment is possible. Although our
management team has experience and has had success in making investments in real estate-related lodging debt and hotel
assets, the past performance of these investments is not necessarily indicative of the results of our future investments.
Our investment portfolio will likely contain investments concentrated in a single industry and will not be fully diversified.
We hold an investment in OpenKey, which operates in the lodging industry. To the extent we seek additional investments,
we would expect that they will generally be in lodging-related entities. As such, our investment portfolio will likely contain
investments concentrated in a single industry and may not be fully diversified by asset class, geographic region or other criteria,
which will expose us to significant loss due to concentration risk. Investors have no assurance that the degree of diversification
in our investment portfolio will increase at any time in the future.
69
Risks Related to Our Organization and Structure
Our charter contains provisions that may delay or prevent a change of control transaction.
Our charter contains 9.8% ownership limits. For the purpose of preserving our REIT qualification, our charter prohibits
direct or constructive ownership by any person of more than:
•
•
9.8% of the lesser of the total number or value of the outstanding shares of our common stock, or
9.8% of the lesser of the total number or value of the outstanding shares of any class or series of our preferred stock or
any other stock of our company, unless our board of directors grants a waiver.
Our charter’s constructive ownership rules are complex and may cause stock owned actually or constructively by a group
of related individuals and/or entities to be deemed to be constructively owned by one individual or entity. As a result, the
acquisition of less than 9.8% of our common stock by an individual or entity could nevertheless cause that individual or entity
to own constructively in excess of 9.8% of the outstanding common stock, and thus be subject to our charter’s ownership limit.
Any attempt to own or transfer shares of our common stock in excess of the ownership limit without the consent of our board of
directors will be void, and could result in the shares being automatically transferred to a charitable trust.
Our board of directors may create and issue an additional class or series of common stock or preferred stock without
stockholder approval.
Our charter authorizes our board of directors to issue common stock or preferred stock in one or more classes and to
establish the preferences and rights of any class of common stock or preferred stock issued. Subject to the terms of any
outstanding classes or series of preferred stock, these actions can be taken without obtaining stockholder approval. Our issuance
of additional classes of common stock or preferred stock could have the effect of delaying or preventing someone from taking
control of us, even if our stockholders believe that a change in control was in their best interests.
Certain provisions in the partnership agreement for our operating partnership may delay or prevent unsolicited
acquisitions of us.
Provisions in the partnership agreement of our operating partnership may delay or make more difficult unsolicited
acquisitions of us or changes in our control. These provisions could discourage third parties from making proposals involving
an unsolicited acquisition of us or change of our control, although some stockholders might consider such proposals, if made,
desirable. These provisions include, among others:
•
•
•
•
redemption rights of qualifying parties;
transfer restrictions on our common units;
the ability of the general partner in some cases to amend the partnership agreement without the consent of the limited
partners; and
the right of the limited partners to consent to transfers of the general partnership interest and mergers of the operating
partnership under specified circumstances.
Because provisions contained in Maryland law and our charter may have an anti-takeover effect, investors may be
prevented from receiving a “control premium” for their shares.
Provisions contained in our charter and the Maryland General Corporation Law (the “MGCL”) may have effects that delay,
defer, or prevent a takeover attempt, which may prevent stockholders from receiving a “control premium” for their shares. For
example, these provisions may defer or prevent tender offers for our common stock or purchases of large blocks of our common
stock, thereby limiting the opportunities for our stockholders to receive a premium for their common stock over then-prevailing
market prices.
These provisions include the following:
•
•
The ownership limit in our charter limits related investors, including, among other things, any voting group, from
acquiring over 9.8% of our common stock or of any class of our preferred stock without our permission.
Our charter authorizes our board of directors to issue common stock or preferred stock in one or more classes and to
establish the preferences and rights of any class of common stock or preferred stock issued. These actions can be taken
without soliciting stockholder approval. Our common stock and preferred stock issuances could have the effect of
delaying or preventing someone from taking control of us, even if a change in control were in our stockholders’ best
interests.
70
Maryland statutory law provides that an act of a director relating to or affecting an acquisition or a potential acquisition of
control of a corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director.
Hence, directors of a Maryland corporation by statute are not required to act in certain takeover situations under the same
standards of care, and are not subject to the same standards of review, as apply in Delaware and other corporate jurisdictions.
Certain provisions of Maryland law could inhibit changes in control.
Certain provisions of the MGCL may have the effect of inhibiting a third party from making a proposal to acquire us under
circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing
market price of our common stock or a “control premium” for their shares or inhibit a transaction that might otherwise be
viewed as being in the best interest of our stockholders. These provisions include:
•
•
“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and
an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power
of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an
interested stockholder, and thereafter impose special stockholder voting requirements on these business combinations,
unless certain fair price requirements set forth in the MGCL are satisfied; and
“control share” provisions that provide that “control shares” of our company (defined as shares which, when
aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing
ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect
acquisition of ownership or control of outstanding “control shares”) have no voting rights except to the extent
approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the
matter, excluding all interested shares.
In addition, Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered
under the Exchange Act and at least three independent directors to elect to be subject, notwithstanding any contrary provision in
the charter or bylaws, to any or all of the following five provisions: a classified board; a two-thirds stockholder vote
requirement for removal of a director; a requirement that the number of directors be fixed only by vote of the directors; a
requirement that a vacancy on the board of directors be filled only by the remaining directors and for the remainder of the full
term of the class of directors in which the vacancy occurred; and a requirement that the holders of at least a majority of all votes
entitled to be cast request a special meeting of stockholders.
Our charter opts out of the business combination/moratorium and control share provisions of the MGCL. Our charter also
prevents us from making any elections under Subtitle 8 of the MGCL unless approved by our stockholders by a majority of the
votes cast. Through a provision unrelated to Subtitle 8, our charter provides that directors may only be removed for cause and
by the vote of a majority of the stockholders. Because the opt outs from the business combination/moratorium and control share
provisions of the MGCL are contained in our charter, they cannot be amended unless the board of directors recommends the
amendment and the stockholders approve the amendment.
Our board of directors can take many actions without stockholder approval.
Our board of directors has overall authority to oversee our business and affairs and determine our major corporate policies.
This authority includes significant flexibility. For example, our board of directors can do the following without stockholder
approval:
•
•
•
•
•
•
•
amend or revise at any time our dividend policy with respect to our common stock or preferred stock (including by
eliminating, failing to declare, or significantly reducing dividends on these securities);
terminate Ashford LLC under certain conditions pursuant to our advisory agreement;
amend or revise at any time and from time to time our investment, financing, borrowing and dividend policies and our
policies with respect to all other activities, including growth, debt, capitalization and operations;
amend our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal
requirements;
subject to the terms of our charter, prevent the ownership, transfer and/or accumulation of shares in order to protect our
status as a REIT or for any other reason deemed to be in the best interests of us and our stockholders;
subject to the terms of any outstanding classes or series of preferred stock, issue additional shares without obtaining
stockholder approval, which could dilute the ownership of our then-current stockholders;
subject to the terms of any outstanding classes or series of preferred stock, amend our charter to increase or decrease
the aggregate number of shares of stock or the number of shares of stock of any class or series, without obtaining
stockholder approval;
71
•
•
•
•
subject to the terms of any outstanding classes or series of preferred stock, classify or reclassify any unissued shares of
our common stock or preferred stock and set the preferences, rights and other terms of such classified or reclassified
shares, including provisions that may have an anti-takeover effect, without obtaining stockholder approval;
employ and compensate affiliates (subject to disinterested director approval);
direct our resources toward investments that do not ultimately appreciate over time; and
determine that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.
Any of these actions could increase our operating expenses, impact our ability to make distributions or reduce the value of
our assets without giving our stockholders the right to vote on whether we should take such actions.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in
good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent
person in a like position would use under similar circumstances. In addition, our charter eliminates our directors’ and officers’
liability to us and our stockholders for money damages except for liability resulting from actual receipt of an improper benefit
or profit in money, property or services or a judgment of active and deliberate dishonesty that was material to the cause of
action. Our charter requires us to indemnify our directors and officers and to advance expenses prior to the final disposition of a
proceeding to the maximum extent permitted by Maryland law for liability actually incurred in connection with any proceeding
to which they may be made, or threatened to be made, a party, except to the extent that the act or omission of the director or
officer was material to the matter giving rise to the proceeding and was either committed in bad faith or was the result of active
and deliberate dishonesty, the director or officer actually received an improper personal benefit in money, property or services,
or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was
unlawful. As a result, we and our stockholders may have more limited rights against our directors and officers than might
otherwise exist under common law. In addition, we are generally obligated to advance the defense costs incurred by our
directors and officers, prior to any determination regarding the availability of indemnification if actions are taken against them
in their capacity as directors and officers.
Future issuances of securities, including our common stock and preferred stock, could reduce existing investors’ relative
voting power and percentage of ownership and may dilute our share value.
Our charter authorizes the issuance of up to 250,000,000 shares of common stock and 80,000,000 shares of preferred stock.
As of March 8, 2022, we had 65,348,848 shares of our common stock issued and outstanding, 3,078,017 shares of our Series B
Cumulative Convertible Preferred Stock, 1,600,000 shares of our Series D Cumulative Preferred Stock, 2,912,159 shares of our
Series E Redeemable Preferred Stock and 36,804 shares of our Series M Redeemable Preferred Stock. We also have also
authorized 10,000,000 shares of our Series C Preferred Stock, 28,000,000 shares of our Series E Preferred Stock and
28,000,000 shares of our Series M Preferred Stock, and no shares of Series C Preferred Stock are issued. Our charter allows us
to create new series of preferred stock at any time. Accordingly, we may issue up to an additional 184,651,152 shares of
common stock and 72,373,020 shares of preferred stock.
Future issuances of common stock or preferred stock, including through our “at-the-market” equity offering program, our
SEDA (as defined below), the issuance of Series E Preferred Stock and Series M Preferred Stock (for which we have an
effective registration statement on file with the SEC) and privately negotiated exchange agreements with holders of our
preferred stock in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), could decrease
the relative voting power of our common stock or preferred stock and may cause substantial dilution in the ownership
percentage of our then existing holders of common or preferred stock. We may value any common stock or preferred stock
issued in the future on an arbitrary basis including for services or acquisitions or other corporate actions that may have the
effect of reducing investors’ relative voting power and/or diluting the net tangible book value of the shares held by our
stockholders, and might have an adverse effect on any trading market for our securities. Our board of directors may designate
the rights, terms and preferences of our authorized but unissued common shares or preferred shares at its discretion, including
conversion and voting preferences without stockholder approval.
Risks Related to Our Status as a REIT
Failure to qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular
corporation, which would substantially reduce funds available for distributions to our stockholders.
We operate in a manner intended to allow us to qualify as a REIT for U.S. federal income tax purposes. We believe that our
organization and current and proposed method of operation will enable us to meet the requirements for qualification and
taxation as a REIT commencing with our taxable year ended December 31, 2013. However, we may not qualify or remain
72
qualified as a REIT or we may be required to rely on a REIT “savings clause.” If we were to rely on a REIT “savings clause,”
we would have to pay a penalty tax, which could be material.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the
funds available for distributions to our stockholders because:
•
•
•
we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would
be subject to U.S. federal income tax at regular corporate rates;
we could be subject to the federal alternative minimum tax for the taxable years beginning before January 1, 2018, and
possibly increased state and local income taxes; and
unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the
fifth calendar year after the year in which we failed to qualify as a REIT.
If, as a result of covenants applicable to our future debt, we are restricted from making distributions to our stockholders, we
may be unable to make distributions necessary for us to avoid U.S. federal corporate income and excise taxes and to qualify and
maintain our qualification as a REIT, which could materially and adversely affect us. In addition, if we fail to qualify as a
REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could
impair our ability to expand our business and raise capital, make distributions to our stockholders and it would adversely affect
the value of our securities.
If Ashford Trust failed to qualify as a REIT in any of its 2009 through 2013 taxable years, we would be prevented from
electing to qualify as a REIT under applicable Treasury Regulations until the fifth year after such failure.
Under applicable Treasury Regulations, if Ashford Trust failed to qualify as a REIT in any of its 2009 through 2013
taxable years, unless Ashford Trust’s failure to qualify as a REIT was subject to relief under U.S. federal income tax laws, we
would be prevented from electing to qualify as a REIT prior to the fifth calendar year following the year in which Ashford Trust
failed to qualify.
Even if we qualify and remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.
Even if we qualify and remain qualified for taxation as a REIT, we may be subject to certain federal, state, and local taxes
on our income and assets, as well as foreign taxes to the extent that we own assets or conduct operations in international
jurisdictions. For example:
• We will be required to pay tax on undistributed REIT taxable income.
•
•
•
If we have net income from the disposition of foreclosure property held primarily for sale to customers in the ordinary
course of business or other non-qualifying income from foreclosure property, we must pay tax on that income at the
highest corporate rate.
If we sell a property in a “prohibited transaction,” our gain from the sale would be subject to a 100% penalty tax.
Each of our TRSs is a fully taxable corporation and will be subject to federal and state taxes on its income.
• We may experience increases in our state and local income tax burden. Over the past several years, certain state and
local taxing authorities have significantly changed their income tax regimes in order to raise revenues. The changes
enacted include the taxation of modified gross receipts (as opposed to net taxable income), the suspension of and/or
limitation on the use of net operating loss deductions, increases in tax rates and fees, the addition of surcharges, and
the taxation of our partnership income at the entity level. Facing mounting budget deficits, more state and local taxing
authorities have indicated that they are going to revise their income tax regimes in this fashion and/or eliminate certain
federally allowed tax deductions such as the REIT dividends paid deduction.
Failure to make required distributions would subject us to U.S. federal corporate income tax.
We intend to operate in a manner that allows as a REIT for U.S. federal income tax purposes. In order to qualify as a REIT,
we generally are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends
paid deduction and excluding any net capital gain, each year to our stockholders. To the extent that we satisfy this distribution
requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax
on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that
we pay out to our stockholders in a calendar year is less than a minimum amount specified under the Code.
Our TRS structure increases our overall tax liability.
Our TRSs are subject to federal, state and local income tax on their taxable income, which consists of the revenues from
the hotel properties leased by our TRS lessees, or, in the case of The Ritz-Carlton St. Thomas hotel, owned by our TRS, net of
73
the operating expenses for such hotel properties and, in the case of hotel properties leased by our TRS lessees, rent payments to
us. Accordingly, although our ownership of our TRS allows us to participate in the operating income from our hotel properties
in addition to receiving rent, the net operating income is fully subject to income tax. The after-tax net income of our TRS is
available for distribution to us, subject to any applicable withholding requirements.
If our leases with our TRS lessees are not respected as true leases for U.S. federal income tax purposes, we would fail to
qualify as a REIT.
To qualify as a REIT, we are required to satisfy two gross income tests, pursuant to which specified percentages of our
gross income must be passive income, such as rent. For the rent paid pursuant to the hotel leases with our TRS lessees, which
constitutes substantially all of our gross income, to qualify for purposes of the gross income tests, the leases must be respected
as true leases for U.S. federal income tax purposes and must not be treated as service contracts, joint ventures or some other
type of arrangement. We have structured our leases, and intend to structure any future leases, so that the leases will be respected
as true leases for U.S. federal income tax purposes, but the IRS may not agree with this characterization. If the leases were not
respected as true leases for U.S. federal income tax purposes, we would not be able to satisfy either of the two gross income
tests applicable to REITs and likely would fail to qualify as a REIT.
Our ownership of TRSs is limited and our transactions with our TRSs will cause us to be subject to a 100% penalty tax on
certain income or deductions if those transactions are not conducted on arm’s-length terms.
A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be
qualifying assets or income if held or earned directly by a REIT, including gross operating income from hotels that are operated
by eligible independent contractors pursuant to hotel management agreements. Both the subsidiary and the REIT must jointly
elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting
power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s assets
may consist of stock or securities of one or more TRSs. In addition, the TRS rules limit the deductibility of interest paid or
accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules
also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-
length basis. Finally the 100% excise tax also applies to the underpricing of services by a TRS to its parent REIT in contexts
where the services are unrelated to services for REIT tenants.
Our TRSs are subject to federal, foreign, state and local income tax on their taxable income, and their after-tax net income
is available for distribution to us but is not required to be distributed to us. We believe that the aggregate value of the stock and
securities of our TRSs is less than 20% of the value of our total assets (including our TRS stock and securities).
We monitor the value of our respective investments in our TRSs for the purpose of ensuring compliance with TRS
ownership limitations. In addition, we scrutinize all of our transactions with our TRSs to ensure that they are entered into on
arm’s-length terms to avoid incurring the 100% excise tax described above. For example, in determining the amounts payable
by our TRSs under our leases, we engaged a third party to prepare transfer pricing studies to ascertain whether the lease terms
we established are on an arm’s-length basis as required by applicable Treasury Regulations. However, the receipt of a transfer
pricing study does not prevent the IRS from challenging the arm’s length nature of the lease terms between a REIT and its TRS
lessees. Consequently, we may not be able to avoid application of the 100% excise tax discussed above. Moreover, the IRS may
impose excise taxes and penalties based on transactions that occurred prior to the spin-off.
If our hotel managers, including Ashford Hospitality Services, LLC and its subsidiaries (including Remington Hotels) do
not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.
Rent paid by a lessee that is a “related party tenant” of ours will not be qualifying income for purposes of the two gross
income tests applicable to REITs. We lease all of our hotels to our TRS lessees, except for The Ritz-Carlton St. Thomas hotel,
which is owned by one of our TRSs. A TRS lessee will not be treated as a “related party tenant,” and will not be treated as
directly operating a lodging facility, which is prohibited, to the extent the TRS lessee leases properties from us that are managed
by an “eligible independent contractor.”
We believe that the rent paid by our TRS lessees is qualifying income for purposes of the REIT gross income tests and that
our TRSs qualify to be treated as TRSs for U.S. federal income tax purposes, but there can be no assurance that the IRS will not
challenge this treatment or that a court would not sustain such a challenge. If we failed to meet either the asset or gross income
tests, we would likely lose our REIT qualification for U.S. federal income tax purposes, unless certain relief provisions applied.
If our hotel managers, including Ashford Hospitality Services, LLC (“AHS”) and its subsidiaries (including Remington
Hotels), do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT. Each of the hotel management
companies that enters into a management contract with our TRS lessees must qualify as an “eligible independent contractor”
74
under the REIT rules in order for the rent paid to us by our TRS lessees to be qualifying income for our REIT income test
requirements. Among other requirements, in order to qualify as an eligible independent contractor a manager must not own
more than 35% of our outstanding shares (by value) and no person or group of persons can own more than 35% of our
outstanding shares and the ownership interests of the manager, taking into account only owners of more than 5% of our shares
and, with respect to ownership interests in such managers that are publicly-traded, only holders of more than 5% of such
ownership interests. Complex ownership attribution rules apply for purposes of these 35% thresholds. Although we intend to
monitor ownership of our shares by our hotel managers and their owners, it is possible that these ownership levels could be
exceeded. Additionally, we and AHS and its subsidiaries, including Remington Hotels, must comply with the provisions of the
private letter ruling we obtained from the IRS in connection with Ashford Inc.’s acquisition of Remington Hotels to ensure that
AHS and its subsidiaries, including Remington Hotels, continue to qualify as “eligible independent contractors.”
Complying with REIT requirements may cause us to forego otherwise attractive opportunities.
To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other
things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and
the ownership of our shares of beneficial interest. In order to meet these tests, we may be required to forego investments we
might otherwise make. Thus, compliance with the REIT requirements may have a material adverse effect on our performance.
Complying with REIT requirements may force us to liquidate otherwise attractive investments.
To qualify as a REIT, we must also ensure that at the end of each calendar quarter at least 75% of the value of our assets
consists of cash, cash items, government securities, and qualified REIT real estate assets. The remainder of our investment in
securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the
outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one
issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real
estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented
by securities of one or more TRSs and no more than 25% of the value of our total assets can be represented by certain publicly
offered REIT debt instruments.
If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days
after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences. As a result, we
may be required to liquidate otherwise attractive investments.
Complying with REIT requirements may force us to borrow to make distributions to stockholders.
As a REIT, we must distribute at least 90% of our annual REIT taxable income, excluding net capital gains, (subject to
certain adjustments) to our stockholders. To the extent that we satisfy the distribution requirement, but distribute less than 100%
of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we
will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is
less than a minimum amount specified under federal tax laws.
From time to time, we may generate taxable income greater than our net income for financial reporting purposes or our
taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds
available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices, or find another
alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the
distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could
increase our costs or reduce the value of our equity.
We may elect to pay dividends on our common stock in cash or a combination of cash and shares of securities as permitted
under U.S. federal income tax laws governing REIT distribution requirements. To the extent that we make distributions in
excess of our current and accumulated earnings and profits (as determined for U.S. federal income tax purposes), such
distributions would generally be considered a return of capital for U.S. federal income tax purposes to the extent of the holder’s
adjusted tax basis in its shares. A return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis
in its investment. To the extent that distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain
from the sale or exchange of such stock.
75
We may in the future choose to pay taxable dividends in our common stock instead of cash, in which case stockholders
may sell our common stock to pay tax on such dividends, placing downward pressure on the market price of our common
stock.
We may distribute taxable dividends that are payable in cash and common stock at the election of each stockholder subject
to certain limitations, including that the cash portion be at least 20% of the total distribution (10% for distributions declared on
or after November 1, 2021, and on or before June 30, 2022; while not clear, such 10% limitation could be extended in the
future).
If we make a taxable dividend payable in cash and common stock, taxable stockholders receiving such dividends will be
required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings
and profits, as determined for U.S. federal income tax purposes. As a result, stockholders may be required to pay income tax
with respect to such dividends in excess of the cash dividends received. If a U.S. stockholder sells the common stock that it
receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect
to the dividend, depending on the market price of our common stock at the time of the sale. Furthermore, with respect to certain
non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in
respect of all or a portion of such dividend that is payable in common stock. If we made a taxable dividend payable in cash and
our common stock and a significant number of our stockholders determine to sell shares of our common stock in order to pay
taxes owed on dividends, it may put downward pressure on the trading price of our common stock. We do not currently intend
to pay taxable dividends of our common stock and cash, although we may choose to do so in the future.
The prohibited transactions tax may limit our ability to dispose of our properties.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or
other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of
business. We may be subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property. We
may not be able to comply with the safe harbor to the characterization of the sale of real property by a REIT as a prohibited
transaction. Consequently, we may choose not to engage in certain sales of our properties or we may conduct such sales through
our TRS, which would be subject to federal and state income taxation.
The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse
consequences to our stockholders.
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval
of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to
qualify as a REIT, we would become subject to U.S. federal and state and local income taxes on our taxable income and would
no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on
the total return received by our stockholders.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum U.S. federal income tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are
taxed at individual rates is 20%. Dividends payable by REITs, however, generally are not eligible for this reduced maximum
rate on qualified dividend income. However, under the Tax Cuts and Jobs Act, a non-corporate taxpayer may deduct 20% of
ordinary REIT dividends that are not “capital gain dividends” or “qualified dividend income” resulting in an effective
maximum U.S. federal income tax rate of 29.6%. Individuals, trusts and estates whose income exceeds certain thresholds are
also subject to a 3.8% Medicare tax on dividends received from us. The more favorable rates applicable to regular corporate
qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less
attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of
the shares of REITs, including our stock.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our securities.
At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may
be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or
any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted,
promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our
stockholders could be adversely affected by any such change in the U.S. federal income tax laws, regulations or administrative
interpretations. It is possible that future legislation would result in a REIT having fewer advantages, and it could become more
advantageous for a company that invests in real estate to elect to be taxed, for U.S. federal income tax purposes, as a
corporation.
76
If our operating partnership failed to qualify as a partnership for U.S. federal income tax purposes, we would cease to
qualify as a REIT and suffer other adverse consequences.
We believe that our operating partnership will be treated as a partnership for U.S. federal income tax purposes. As a
partnership, our operating partnership is not subject to U.S. federal income tax on its income. Instead, each of its partners,
including us, is allocated, and may be required to pay tax with respect to, its share of our operating partnership’s income. The
IRS could challenge the status of our operating partnership or any other subsidiary partnership in which we own an interest as a
partnership for U.S. federal income tax purposes, and a court could sustain such a challenge. If the IRS were successful in
treating our operating partnership or any such other subsidiary partnership as an entity taxable as a corporation for U.S. federal
income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and,
accordingly, we would likely cease to qualify as a REIT. Also, the failure of our operating partnership or any subsidiary
partnerships to qualify as a partnership could cause it to become subject to federal and state corporate income tax, which would
reduce significantly the amount of cash available for debt service and for distribution to its partners, including us.
Note that although partnerships have traditionally not been subject to U.S. federal income tax at the entity level as
described above, new audit rules, effective for tax years ending after December 31, 2017, will generally apply to the
partnership. Under the new rules, unless an entity elects otherwise, taxes arising from audit adjustments are required to be paid
by the entity rather than by its partners or members. We will have the authority to utilize, and intend to utilize, any exceptions
available under the new provisions (including any changes) and Treasury Regulations so that the partners, to the fullest extent
possible, rather than the partnership itself, will be liable for any taxes arising from audit adjustments to the issuing entity’s
taxable income. One such exception is to apply an elective alternative method under which the additional taxes resulting from
the adjustment are assessed from the affected partners (often referred to as a “push-out election”), subject to a higher rate of
interest than otherwise would apply. When a push-out election causes a partner that is itself a partnership to be assessed with its
share of such additional taxes from the adjustment, such partnership may cause such additional taxes to be pushed out to its own
partners. In addition, Treasury Regulations provide that a partner that is a REIT may be able to use deficiency dividend
procedures with respect to such adjustments. Many questions remain as to how the partnership audit rules will apply, and it is
not clear at this time what effect these rules will have on us. However, it is possible that these changes could increase the U.S.
federal income tax, interest, and/or penalties otherwise borne by us in the event of a U.S. federal income tax audit of a
subsidiary partnership (such as our operating partnership).
Qualifying as a REIT involves highly technical and complex provisions of the Code.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which, in certain
instances, only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize
our REIT qualification. Our qualification as a REIT will depend on our satisfaction or deemed satisfaction (through the
application of REIT “savings clauses”) of certain asset, income, organizational, distribution, stockholder ownership and other
requirements on a continuing basis. New legislation, court decisions or administrative guidance, in each case possibly with
retroactive effect, may make it more difficult or impossible for us to qualify as a REIT.
Declines in the values of our investments may make it more difficult for us to maintain our qualification as a REIT or
exemption from the Investment Company Act.
If the market value or income potential of real estate-related investments declines as a result of increased interest rates or
other factors, we may need to increase our real estate-related investments and income or liquidate our non-qualifying assets in
order to maintain our REIT qualification or exemption from the Investment Company Act of 1940 (the “Investment Company
Act”). If the decline in real estate asset values and/or income occurs quickly, this may be especially difficult to accomplish. This
difficulty may be exacerbated by the illiquid nature of any non-qualifying assets that we may own. We may have to make
investment decisions that we otherwise would not make absent the REIT and Investment Company Act considerations.
Risks Related to our Common Stock
Broad market fluctuations could negatively impact the market price of our stock.
The market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate
and cause significant price variations to occur. Some of the factors that could affect our stock price or result in fluctuations in
the price or trading volume of our common stock include:
•
•
•
actual or anticipated variations in our quarterly operating results;
changes in our operations or earnings estimates or publication of research reports about us or the industry;
changes in market valuations of similar companies;
77
•
•
•
•
•
•
adverse market reaction to any increased indebtedness we incur in the future;
additions or departures of key management personnel;
actions by institutional stockholders;
failure to meet and maintain REIT qualification;
speculation in the press or investment community; and
general market and economic conditions.
In addition, the stock market has experienced price and volume fluctuations that have affected the market prices of many
companies in industries similar or related to ours and may have been unrelated to operating performances of these companies.
These broad market fluctuations could reduce the market price of our common stock. During the fiscal year ended December
31, 2021, the high of our stock price was $7.45 and the low was $4.18.
Future offerings of debt securities, which would be senior to our common stock upon liquidation, and future offerings of
equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of
dividend and liquidating distributions, may adversely affect the market price of our common stock.
In the future, we may attempt to increase our capital resources by making offerings of debt or equity securities, including
commercial paper, medium-term notes, senior or subordinated notes, convertible securities, and classes of preferred stock or
common stock or classes of preferred units. Upon liquidation, holders of our debt securities and preferred stock or preferred
units and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our
common stock. Equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common
stock, or both. Preferred stock and preferred units, if issued, could have a preference on liquidating distributions or a preference
on dividend payments that could limit our ability to make a distribution to the holders of our common stock. Because our
decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we
cannot predict or estimate the amount, timing, or nature of our future offerings. Thus, our stockholders bear the risk of our
future offerings reducing the market price of our securities and diluting their securities holdings in us.
The number of shares available for future sale could adversely affect the per share trading price of our common stock.
We cannot predict whether future issuances of shares of our common stock or the availability of shares for resale in the
open market will decrease the per share trading price of our common stock. The issuance of substantial numbers of shares of
our common stock in the public market, or upon exchange of common units of our operating partnership, or the perception that
such issuances might occur, could adversely affect the per share trading price of our common stock. Sales of substantial
amounts of shares of our common stock in the public market, or upon exchange of the common units, or speculation that such
sales might occur, could adversely affect the liquidity of the market for our common stock or the prevailing market price of our
common stock. In addition, the exchange of common units for common stock, the exercise of any stock options or the vesting
of any restricted stock granted under the 2013 Equity Incentive Plan, the issuance of our common stock or common units in
connection with property, portfolio or business acquisitions and other issuances of our common stock or common units could
adversely affect the market price of our common stock. Our directors and executive officers own common units in our
Company. Such common units may be redeemed by the holders for shares of our common stock or, at our option, cash on a
one-for-one basis. The holders of these common units may sell shares issued to them, if any, upon redemption of the common
units. So long as the holders of common units retain significant ownership in us and are able to sell such shares in the public
markets, the market price of our common stock may be adversely affected. Moreover, the existence of shares of our common
stock reserved for issuance as restricted shares or upon exchange of options or common units may adversely affect the terms
upon which we may be able to obtain additional capital through the sale of equity securities. Any future sales by us of our
common stock or securities convertible into common stock may be dilutive to existing stockholders.
The market price of our common stock could be adversely affected by our level of cash distributions.
The market value of the equity securities of a REIT is based primarily upon the market’s perception of the REIT’s growth
potential and its current and potential future cash distributions, whether from operations, sales or refinancings, and is
secondarily based upon the real estate market value of the underlying assets. For that reason, our common stock may trade at
prices that are higher or lower than our net asset value per share. To the extent we retain operating cash flow for investment
purposes, working capital reserves or other purposes, these retained funds, while increasing the value of our underlying assets,
may not correspondingly increase the market price of our common stock. Our failure to meet the market’s expectations with
regard to future earnings and cash distributions likely would adversely affect the market price of our common stock. See the
risk factor “The outbreak of COVID-19 has and will continue to reduce our occupancy rates and RevPAR.”
78
Our stock repurchase program could increase the volatility of the price of our common stock.
Our board of directors has approved a share repurchase program under which we may purchase up to $50 million of our
common stock from time to time. The specific timing, manner, price, amount and other terms of the repurchases, if any, will be
at management’s discretion and will depend on market conditions, corporate and regulatory requirements and other factors. We
are not required to repurchase shares under the repurchase program, and the board of directors may modify, suspend or
terminate the repurchase program at any time for any reason. As of March 8, 2022, $50.0 million remains available for
repurchases under the current stock repurchase program. We cannot predict the impact that future repurchases, if any, of our
common stock under this program will have on our stock price or earnings per share. Important factors that could cause us to
discontinue or decrease our share repurchases include, among others, unfavorable market conditions, the market price of our
common stock, the nature of other investment or strategic opportunities presented to us from time to time, the rate of dilution of
our equity compensation programs, our ability to make appropriate, timely, and beneficial decisions as to when, how, and
whether to purchase shares under the stock repurchase program, and the availability of funds necessary to continue purchasing
stock. If we curtail our repurchase program, our stock price may be negatively affected.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Offices
We lease our headquarters located at 14185 Dallas Parkway, Suite 1200, Dallas, Texas 75254.
Hotel Properties
As of December 31, 2021, we held ownership interests in 14 hotel properties that were included in our consolidated
operations, which included direct ownership in 12 hotel properties and 75% ownership in two hotel properties through equity
investments with our partner. Thirteen of our hotel properties are located in the United States and one is located in the U.S.
Virgin Islands. Each of the 14 hotel properties is encumbered by loans as described in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Indebtedness.”
79
Hotel Properties
The following table presents certain information related to our hotel properties:
Hotel Property
Location
Total Rooms % Owned Owned Rooms
Occupancy
ADR
RevPAR
Year Ended December 31, 2021
Fee Simple Properties
Capital Hilton ................................................. Washington, D.C.
Marriott Seattle Waterfront ........................... Seattle, WA
The Notary Hotel ........................................... Philadelphia, PA
The Clancy ..................................................... San Francisco, CA
Sofitel Chicago Magnificent Mile ................. Chicago, IL
Pier House Resort & Spa ............................... Key West, FL
The Ritz-Carlton St. Thomas ........................ St. Thomas, USVI
Park Hyatt Beaver Creek Resort & Spa ......... Beaver Creek, CO
Hotel Yountville ............................................. Yountville, CA
.................... Truckee, CA
The Ritz-Carlton Sarasota .............................. Sarasota, FL
The Ritz-Carlton Lake Tahoe (1)
Mr. C Beverly Hills Hotel (2)
Ground Lease Properties (3)
Hilton La Jolla Torrey Pines (4)
Bardessono Hotel and Spa (5)
...................... La Jolla, CA
......................... Yountville, CA
.......................... Los Angeles, CA
Total ............................................................
550
361
499
410
415
142
180
190
80
276
170
143
394
65
3,875
75 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
75 %
100 %
413
361
499
410
415
142
180
190
80
276
170
143
296
65
30.47 % $ 159.77 $
48.68
52.22 % 219.51
114.64
36.94 % 176.70
55.97 % 174.64
46.93 % 202.88
81.83 % 591.40
79.52 % 1,049.29
54.94 % 454.17
57.90 % 762.15
76.99 % 545.68
55.00 % 642.81
63.88 % 332.86
65.27
97.74
95.21
483.93
834.39
249.50
441.29
420.14
353.56
212.62
57.80 % 203.63
67.92 % 1,141.39
117.70
775.18
3,640
52.44 % $ 384.95 $ 201.86
________
(1) The above information does not include the operations of ten condominium units not owned by The Ritz-Carlton Lake Tahoe.
(2)
Includes 138 hotel rooms and five residences adjacent to the hotel. The results of the Mr. C Beverly Hills Hotel and the five adjacent luxury residences are
included from August 5, 2021 through December 31, 2021.
(3) Some of our hotel properties are on land subject to ground leases, two of which cover the entire property.
(4) The ground lease expires in 2067. The ground lease contains one extension option of either 10 or 20 years dependent upon capital investment spend during
the lease term.
(5) The initial ground lease expires in 2065. The ground lease contains two 25-year extension options, at our election.
80
Item 3. Legal Proceedings
On October 24, 2019, the Company provided notice to Accor of the material breach of Accor’s responsibilities under the
Accor management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago, Illinois. On
November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York,
New York County, seeking a declaratory judgment that no breach under the management agreement has occurred and an
injunction to prevent Ashford TRS Chicago II from terminating the management agreement. Accor’s complaint was dismissed
on or about February 27, 2020. On January 6, 2020, Ashford TRS Chicago II filed a complaint against Accor in the Supreme
Court of the State of New York, New York County, alleging breach of the Accor management agreement and seeking damages
and a declaration of its right to terminate the Accor management agreement. On July 20, 2020, Accor filed an Amended
Answer and Counterclaims against Ashford TRS Chicago II, in which Accor asserts two causes of action: First, Accor asserts a
counterclaim for declaratory judgment that Accor correctly calculated the amount payable to Ashford TRS Chicago II under the
management agreement to “cure” Accor’s performance test failure (the “Cure Amount”). Second, Accor asserts a counterclaim
for breach of contract alleging that Ashford TRS Chicago II breached the management agreement by wrongfully maintaining
that the Cure Amount for the 2018 and 2019 Performance Test failure is $1,031,549 instead of $535,120. As of December 31,
2021, no amounts have been accrued. On February 16, 2022, the parties entered into a settlement agreement agreeing to: 1)
amend the management agreement; 2) dismiss the lawsuit and counterclaims; 3) stipulate to the failure of the performance tests
and cure amounts for 2018 of $867,682 and 2019 of $784,919; and 4) arbitrate whether the performance tests for 2020 and
2021 were valid and/or required equitable adjustment. On February 23, 2022, Ashford TRS Chicago II and Accor filed a
stipulation of discontinuance dismissing all claims, counterclaims, and cross-claims in the January 6, 2020 action with
prejudice.
One of the Company’s hotel management companies is currently involved in litigation regarding its employment policies
and practices at multiple California hotels, including one of the Company’s hotels. On January 28, 2022, the Court approved a
settlement of this litigation. The resulting loss to the Company is approximately $448,000; although it is entitled to
indemnification in the amount of approximately $291,000, based on the respective periods of ownership of the Company’s
hotel. As of December 31, 2021, approximately $500,000 was accrued.
In June 2020, each of the Company, Ashford Trust, Ashford Inc., and Lismore, a subsidiary of Ashford Inc. (collectively
with the Company, Ashford Trust, Ashford Inc. and Lismore, the “Ashford Companies”), received an administrative subpoena
from the SEC. The Company’s administrative subpoena required the production of documents and other information since
January 1, 2018 relating to, among other things, (1) related party transactions among the Ashford Companies (including the
Lismore Agreement between the Company and Lismore pursuant to which the Company engaged Lismore to negotiate the
refinancing, modification or forbearance of certain mortgage debt) or between any of the Ashford Companies and any officer,
director or owner of the Ashford Companies or any entity controlled by any such person, and (2) the Company’s accounting
policies, procedures, and internal controls related to such related party transactions. In addition, in October 2020, Mr. Monty J.
Bennett, chairman of our board of directors, received an administrative subpoena from the SEC requiring testimony and the
production of documents and other information substantially similar to the requests in the subpoenas received by the Ashford
Companies. On January 11, 2022, the Company received a letter from the staff of the SEC stating that the SEC's investigation is
concluded, and that the SEC enforcement staff does not intend to recommend any action by the SEC against the Company.
Ashford Trust and Ashford Inc. also each received a letter stating that the SEC's investigation is concluded, and that the SEC
enforcement staff does not intend to recommend any action against the respective companies.
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: (1) 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 (2) 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. While we believe it is reasonably possible that we may incur
a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal
issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth
in the applicable California employment laws, we do not believe any potential loss to the Company is reasonably estimable at
this time. As of December 31, 2021, no amounts have been accrued.
As of December 31, 2021, the Company had a $728,000 receivable from Ashford Trust, included in Due from related
parties, net. The receivable related to a legal settlement between Ashford Trust and the City of San Francisco regarding a
81
transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off
from Ashford Trust. The transfer taxes were initially paid by Braemar at the time of the spin-off. The $728,000 gain is included
in “(gain) loss on legal settlements” on the consolidated statements of operations. In January 2022, the City of San Francisco
remitted payment to Ashford Trust, which subsequently remitted payment to Braemar.
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 ADA 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. However, our assessment may change depending upon the
development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty. If we
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.
Item 4. Mine Safety Disclosures
None.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Price and Dividend Information
Our common stock is listed and traded on the NYSE under the symbol “BHR.” On March 8, 2022, there were 623 holders
of record.
Distributions and Our Distribution Policy
We did not pay dividends on our common stock in fiscal year 2020 and 2021. On March 4, 2022, our board of directors
declared a quarterly cash dividend of $0.01 per diluted share for the Company’s common stock for the first quarter of 2022.
Additionally, in March 2022, the board of directors approved an update to our previously announced dividend policy for 2022
to revise our then-expectation to pay a quarterly dividend of $0.01 per share of common stock during 2022. The approval of our
dividend policy does not commit our board of directors to declare future dividends with respect to any quantity or the amount
thereof. The board of directors will continue to review our dividend policy and make announcements with respect thereto. For
income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof.
To qualify as a REIT, we must distribute to our stockholders an amount at least equal to:
(i) 90% of our REIT taxable income, determined before the deduction for dividends paid and excluding any net capital
gain (which does not necessarily equal net income as calculated in accordance with GAAP); plus
(ii) 90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; less
(iii) any excess non-cash income (as determined under the Code).
Distributions made by us are authorized and determined by our board of directors in its sole discretion out of funds legally
available therefor and are dependent upon a number of factors, including restrictions under applicable law, actual and projected
financial condition, liquidity, EBITDA, FFO and results of operations, the revenue we actually receive from our properties, our
operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our
financing arrangements, our REIT taxable income, the annual REIT distribution requirements and such other factors as our
board of directors deems relevant. For more information regarding risk factors that could materially and adversely affect our
ability to make distributions. See “Risk Factors-Risks Related to Our Status as a REIT.” We expect that, at least initially, our
distributions may exceed our net income under GAAP because of non-cash expenses included in net income. To the extent that
our cash available for distribution is less than 90% of our REIT taxable income, we may consider various means to cover any
such shortfall, including borrowing under new loans, selling certain of our assets or using a portion of the net proceeds we
receive from future offerings of equity, equity-related or debt securities or declaring taxable stock dividends. In addition, our
charter allows us to issue preferred stock that could have a preference on distributions, and, if we elect such issuance, the
82
distribution preference on the preferred stock could limit our ability to make distributions to the holders of our common stock.
We cannot assure our stockholders that our distribution policy will not change in the future.
Characterization of Distributions
For income tax purposes, distributions paid consist of ordinary income or capital gains. Distributions paid per share were
characterized as follows:
2021
2020
2019
Amount
%
Amount
%
Amount
%
Common Stock (cash):
Ordinary income ................................................. $
Capital gain ........................................................
Unrecaptured 1250 gain .....................................
Return of capital .................................................
Total .............................................................. $
Common Stock (stock - NYSE: AINC):
Ordinary income ................................................. $
Capital gain ........................................................
Unrecaptured 1250 gain .....................................
Return of capital .................................................
Total .............................................................. $
Preferred Stock – Series B:
Ordinary income ................................................. $
Capital gain ........................................................
Unrecaptured 1250 gain .....................................
—
—
—
—
—
—
—
—
—
—
—
—
—
— % $
—
—
—
—
—
—
— % $
—
—
—
—
—
0.6400 (1)
— %
—
—
100.0000
0.1600 (1)
100.0000
— % $ 0.1600
100.0000 % $ 0.6400
100.0000 %
— % $
—
—
—
— % $
— % $
—
—
—
—
—
—
—
—
—
—
— % $
—
—
—
—
—
—
0.1066 (2)
— %
—
—
100.0000
— % $ 0.1066
100.0000 %
— % $
—
—
—
—
—
1.3752 (1)
— %
—
—
100.0000
Return of capital .................................................
1.3752 (1)
100.0000
1.3752 (1)
100.0000
Total .............................................................. $ 1.3752
100.0000 % $ 1.3752
100.0000 % $ 1.3752
100.0000 %
Preferred Stock – Series D:
Ordinary income ................................................. $
Capital gain ........................................................
Unrecaptured 1250 gain .....................................
—
—
—
— % $
—
—
—
—
—
— % $
—
—
Return of capital .................................................
2.0624 (1)
100.0000
2.0624 (1)
100.0000
—
—
—
1.7817 (1)
— %
—
—
100.0000
Total .............................................................. $ 2.0624
100.0000 % $ 2.0624
100.0000 % $ 1.7817
100.0000 %
Preferred Stock – Series E:
$
Ordinary income .................................................
Capital gain ........................................................
Unrecaptured 1250 gain .....................................
—
—
—
—
— % $
—
—
—
Return of capital .................................................
0.8330 (1)
100.0000
Total .............................................................. $ 0.8330
100.0000 % $
Preferred Stock – Series M:
$
Ordinary income .................................................
Capital gain ........................................................
Unrecaptured 1250 gain .....................................
—
—
—
—
— % $
—
—
—
Return of capital .................................................
0.6832 (1)
100.0000
Total .............................................................. $ 0.6832
100.0000 % $
—
—
—
—
—
—
—
—
—
—
—
—
— % $
—
—
—
—
$
$
— % $
— % $
—
—
—
—
$
$
— % $
—
—
—
—
—
—
—
—
—
—
—
—
— %
—
—
—
—
— %
— %
—
—
—
—
— %
____________________
(1)
The fourth quarter 2018 distributions paid January 15, 2019 to stockholders of record as of December 31, 2018 are treated as 2019
distributions for tax purposes. The fourth quarter 2019 distributions paid January 15, 2020 to stockholders of record as of December 31,
2019 are treated as 2020 distributions for tax purposes. The fourth quarter 2020 distributions paid January 15, 2021 to stockholders of
83
record as of December 31, 2020 are treated as 2021 distributions for tax purposes. The fourth quarter 2021 distributions paid January 18,
2022 to stockholders of record as of December 31, 2021 are treated as 2022 distributions for tax purposes.
(2) On November 5, 2019 Braemar distributed its remaining shares of common stock in Ashford Inc. (NYSE: AINC) to the common
stockholders of record as of the close of business of the New York Stock Exchange on October 29, 2019.
Equity Compensation Plan Information
The following table sets forth certain information with respect to securities authorized and available for issuance under our
equity compensation plans.
Equity compensation plans approved by security holders ......
Equity compensation plans not approved by security holders
Total ...........................................................................
____________________
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
None
None
None
Weighted-Average
Exercise Price Of
Outstanding
Options, Warrants,
And Rights
N/A
N/A
N/A
Number of Securities
Remaining Available
for Future Issuance
774,108
None
774,108
(1)
(1) As of December 31, 2021, approximately 774,000 shares of our common stock, or securities convertible into approximately 774,000 shares
of our common stock, remained available for issuance under our 2013 Equity Incentive Plan. On February 23, 2021, the board of directors
terminated the Advisor Equity Incentive Plan. 1.6 million shares of common stock reserved pursuant with the Advisor Incentive Plan were
never utilized (and no shares were ever issued thereunder). Following the termination of the Advisor Equity Incentive Plan, no shares may be
issued thereunder.
Purchases of Equity Securities by the Issuer
On December 5, 2017, our board of directors approved the stock repurchase program pursuant to which the board of
directors granted a repurchase authorization to acquire shares of the Company’s common stock having an aggregate value of up
to $50 million. The board of directors’ authorization replaced any previous repurchase authorizations.
No shares were purchased during the year ended December 31, 2021, pursuant to the authorization. $50 million remains
authorized by the board of directors pursuant to the December 5, 2017 approval.
The following table provides the information with respect to purchases of our common stock during each of the months in
the quarter ended December 31, 2021:
Period
Common stock:
October 1 to October 31 ....................
November 1 to November 30 ............
December 1 to December 31 .............
Total ................................................
Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of
Shares Purchased as
Part of a Publicly
Announced Plan
Maximum Dollar Value of
Shares That May Yet Be
Purchased Under the Plan
3,254 (1) $
44 (1) $
642 (1) $
$
3,940
—
—
—
—
— $
— $
— $
—
50,000,000
50,000,000
50,000,000
__________________
(1)
There is no cost associated with the forfeiture of restricted shares of 3,254, 44 and 642 of our common stock in October, November and
December, respectively.
Performance Graph
The following graph compares the percentage change in the cumulative total stockholder return on our common stock with
the cumulative total return of the S&P 500 Stock Index and the FTSE NAREIT Lodging & Resorts Index for the period from
December 31, 2016 through December 31, 2021, assuming an initial investment of $100 in stock on December 31, 2016 with
reinvestment of dividends. The NAREIT Lodging Resorts Index is not a published index; however, we believe the companies
included in this index provide a representative example of enterprises in the lodging resort line of business in which we engage.
Stockholders who wish to request a list of companies in the FTSE NAREIT Lodging & Resorts Index may send written
requests to Braemar Hotels & Resorts Inc., Attention: Investor Relations, 14185 Dallas Parkway, Suite 1200, Dallas, Texas
75254.
84
The stock price performance shown below on the graph is not necessarily indicative of future stock price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Braemar Hotels & Resorts Inc., the S&P Index and the FTSE NAREIT Lodging & Resorts Index
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand our results of
operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our
audited consolidated financial statements and the accompanying notes thereto included in Item 8. In addition to historical
financial information, the following discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our results and the timing of selected events may differ materially from those anticipated in
these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” and
elsewhere in this Annual Report on Form 10-K. See “Forward-Looking Statements.”
This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021
and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form
10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II,
Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
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 Smith Travel Research. Two times the
85
Braemar Hotels & Resorts Inc.S&P 500FTSE NAREIT Lodging & Resorts201620172018201920202021050100150200250 U.S. national average was $144 for the year ended December 31, 2021. 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 December 31, 2021, we owned
interests in 14 hotel properties in six states, the District of Columbia and St. Thomas, U.S. Virgin Islands with 3,875 total
rooms, or 3,640 net rooms, excluding those attributable to our joint venture partner. The hotel properties in our current portfolio
are predominantly located in U.S. urban markets and resort locations with favorable growth characteristics resulting from
multiple demand generators. We own 12 of our hotel properties directly, and the remaining two hotel properties through an
investment in a majority-owned consolidated entity.
We are advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement. All of the hotel properties
in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be
provided by employees are provided to us by Ashford LLC.
We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them
for us under management contracts. As of December 31, 2021, Remington Hotels, a subsidiary of Ashford Inc., managed four
of our 14 hotel properties. Third-party management companies managed the remaining hotel properties.
Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which
Ashford Inc. has an ownership interest. These products and services include, but are not limited to design and construction
services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory
services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and
mobile key technology.
Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has
resulted in significant travel restrictions and extended shutdown of numerous businesses throughout the United States. In March
2020, the World Health Organization declared COVID-19 to be a global pandemic. Beginning in late February 2020, we
experienced a significant decline in occupancy and RevPAR associated with COVID-19 as we experienced significant
reservation cancellations as well as a significant reduction in new reservations. The prolonged presence of the virus has resulted
in health and other government authorities imposing widespread restrictions on travel and other businesses.
As of December 31, 2021, the Company maintained unrestricted cash of $216.0 million and restricted cash of $47.4
million. The vast majority of the restricted cash comprises lender and manager held reserves. At the end of the year, there was
also $27.5 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of
its property managers which is also available to fund hotel operating costs. For the year ended December 31, 2021, cash flows
provided by operating activities were approximately $64.0 million. On March 4, 2022, our board of directors declared a
quarterly cash dividend of $0.01 per diluted share for the Company’s common stock for the first quarter of 2022. Additionally,
in March 2022, the board of directors approved an update to our previously announced dividend policy for 2022 to revise our
then-expectation to pay a quarterly dividend of $0.01 per share of common stock during 2022. The approval of our dividend
policy does not commit our board of directors to declare future dividends with respect to any quantity or the amount thereof.
We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully
subside, whether our hotels will be forced to shut down operations or whether one or more possible recurrences of COVID-19
case surges could result in further reductions in business and personal travel or potentially cause state and local governments to
reinstate travel restrictions. Facts and circumstances could change in the future that are outside of management’s control, such
as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to
COVID-19.
Recent Developments
In December 2021, the Company made an additional investment of approximately $116,000 in OpenKey.
On December 27, 2021, the Company entered into a definitive agreement to acquire the 96-room Dorado Beach, a Ritz-
Carlton Reserve in Dorado, Puerto Rico. In addition, the Company is also acquiring the income stream attributable to 14
residential units adjacent to the property that participate in a rental management program. The acquisition is expected to close
on or about March 11, 2022, subject to certain customary closing conditions. The consideration consists of $104 million in cash
and 6.0 million shares of Braemar common stock. The Company will also assume a mortgage loan with a principal balance of
approximately $54 million.
86
On February 2, 2022, the Company refinanced its mortgage loan secured by the Park Hyatt Beaver Creek Resort & Spa,
which had a final maturity date in April 2022. The new, non-recourse mortgage loan totals $70.5 million and has a two-year
initial term with three one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is interest
only and provides for a floating interest rate of SOFR + 2.86%
Key Indicators of Operating Performance
We use a variety of operating and other information to evaluate the operating performance of our business. These key
indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are
non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information
and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels
and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to
determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key
indicators include:
•
•
•
Occupancy. Occupancy means the total number of hotel rooms sold in a given period divided by the total number of
rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure
demand at a specific hotel or group of hotels in a given period.
ADR. ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of
rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful
information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We
use ADR to assess the pricing levels that we are able to generate.
RevPAR. RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily
occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations.
RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues
generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the
leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between
periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the
entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases
in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally
accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.
RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and
profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would
lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in
increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating
margins and profitability as they do not have a substantial effect on variable operating costs.
Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating
performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our
entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior
periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue is
dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.
We also use funds from operations (“FFO”), Adjusted FFO, earnings before interest, taxes, depreciation and amortization
for real estate (“EBITDAre”) and Adjusted EBITDAre as measures of the operating performance of our business. See “Non-
GAAP Financial Measures.”
Principal Factors Affecting Our Results of Operations
The principal factors affecting our operating results include overall demand for hotel rooms compared to the supply of
available hotel rooms, and the ability of our third-party management companies to increase or maintain revenues while
controlling expenses.
Demand. The demand for lodging, including business travel, is directly correlated to the overall economy; as GDP
increases, lodging demand typically increases. Historically, periods of declining demand are followed by extended periods of
relatively strong demand, which typically occurs during the growth phase of the lodging cycle. Beginning in 2020, the
COVID-19 pandemic had a direct impact on demand.
Supply. The development of new hotels is driven largely by construction costs, the availability of financing and expected
performance of existing hotels. Short-term supply is also expected to be below long-term averages. While the industry is
87
expected to have supply growth below historical averages, we may experience supply growth, in certain markets, in excess of
national averages that may negatively impact performance. Beginning in 2020, the COVID-19 pandemic had a direct impact on
supply.
We expect that our ADR, occupancy and RevPAR performance will be impacted by macroeconomic factors such as
national and local employment growth, personal income and corporate earnings, GDP, consumer confidence, office vacancy
rates and business relocation decisions, airport and other business and leisure travel, new hotel construction, the pricing
strategies of competitors and currency fluctuations. In addition, our ADR, occupancy and RevPAR performance are dependent
on the continued success of the Marriott, Hilton, Hyatt and Sofitel brands.
Revenue. Substantially all of our revenue is derived from the operation of hotels. Specifically, our revenue is comprised of:
•
•
•
Rooms revenue: Occupancy and ADR are the major drivers of rooms revenue. Rooms revenue accounts for the
substantial majority of our total revenue.
Food and beverage revenue: Occupancy and the type of customer staying at the hotel are the major drivers of food and
beverage revenue (i.e., group business typically generates more food and beverage business through catering functions
when compared to transient business, which may or may not utilize the hotel’s food and beverage outlets or meeting
and banquet facilities).
Other hotel revenue: Occupancy and the nature of the property are the main drivers of other ancillary revenue, such as
telecommunications, parking and leasing services.
Hotel Operating Expenses. The following presents the components of our hotel operating expenses:
•
•
Rooms expense: These costs include housekeeping wages and payroll taxes, reservation systems, room supplies,
laundry services and front desk costs. Like rooms revenue, occupancy is the major driver of rooms expense and,
therefore, rooms expense has a significant correlation to rooms revenue. These costs can increase based on increases in
salaries and wages, as well as the level of service and amenities that are provided.
Food and beverage expense: These expenses primarily include food, beverage and labor costs. Occupancy and the type
of customer staying at the hotel (i.e., catered functions generally are more profitable than restaurant, bar or other on-
property food and beverage outlets) are the major drivers of food and beverage expense, which correlates closely with
food and beverage revenue.
• Management fees: Base management fees are computed as a percentage of gross revenue. Incentive management fees
generally are paid when operating profits exceed certain threshold levels.
•
Other hotel expenses: These expenses include labor and other costs associated with the other operating department
revenues, as well as labor and other costs associated with administrative departments, franchise fees, sales and
marketing, repairs and maintenance and utility costs.
Most categories of variable operating expenses, including labor costs such as housekeeping, fluctuate with changes in
occupancy. Increases in occupancy are accompanied by increases in most categories of variable operating expenses, while
increases in ADR typically only result in increases in limited categories of operating costs and expenses, such as franchise fees,
management fees and credit card processing fee expenses which are based on hotel revenues. Thus, changes in ADR have a
more significant impact on operating margins than changes in occupancy.
88
RESULTS OF OPERATIONS
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
The following table summarizes changes in key line items from our consolidated statements of operations for the years
ended December 31, 2021 and 2020 (in thousands except percentages):
Year Ended December 31,
2021
2020
Favorable (Unfavorable)
$ Change % Change
Revenue
Rooms ................................................................................................ $
Food and beverage .............................................................................
Other ...................................................................................................
Total hotel revenue ......................................................................
Expenses
Hotel operating expenses:
Rooms .........................................................................................
Food and beverage ......................................................................
Other expenses ............................................................................
Management fees ........................................................................
Total hotel operating expenses ......................................................
Property taxes, insurance and other ....................................................
Depreciation and amortization ...........................................................
Gain on legal settlement .....................................................................
Advisory services fee .........................................................................
Transaction costs ................................................................................
Corporate general and administrative ................................................
Total expenses .............................................................................
Gain (loss) on insurance settlement and disposition of assets ............
Operating income (loss) ..........................................................................
Equity in earnings (loss) of unconsolidated entity .............................
Interest income ...................................................................................
Other income (expense) ......................................................................
Interest expense and amortization of discounts and loan costs ..........
Write-off of loan costs and exit fees ..................................................
Unrealized gain (loss) on derivatives ..................................................
Income (loss) before income taxes ..........................................................
280,568 $
136,265 $ 144,303
105.9 %
90,299
56,675
50,263
40,446
40,036
16,229
427,542
226,974
200,568
79.7
40.1
88.4
(57.2)
(62.6)
(41.1)
(81.9)
(51.1)
(22.9)
(0.5)
(30.9)
(34.6)
(93.1)
101.8
(16.1)
(72.7)
100.0
31.5
49.9
(99.4)
75.5
(4,155)
(22.5)
59,818
75,177
138,914
13,117
287,026
34,997
73,762
(917)
22,641
563
8,717
38,054
46,246
98,467
7,210
(21,764)
(28,931)
(40,447)
(5,907)
189,977
(97,049)
28,483
73,371
—
18,486
—
6,657
(6,514)
(391)
917
(563)
(2,060)
426,789
316,974
(109,815)
696
1,449
(252)
48
—
10,149
(9,453)
(79,851)
81,300
(217)
176
(35)
(128)
(5,126)
5,126
(30,901)
(45,104)
14,203
(1,963)
(3,920)
1,957
32
4,959
(4,927)
(31,587)
(129,083)
97,496
Income tax (expense) benefit .............................................................
(1,324)
4,406
(5,730)
(130.0)
Net income (loss) .......................................................................................
(Income) loss attributable to noncontrolling interest in consolidated
entities ........................................................................................................
Net (income) loss attributable to redeemable noncontrolling interests in
operating partnership ..................................................................................
Net income (loss) attributable to the Company ..................................... $
(32,911)
(124,677)
91,766
73.6
2,650
6,436
(3,786)
(58.8)
3,597
12,979
(9,382)
(72.3)
(26,664) $
(105,262) $
78,598
74.7 %
89
All hotel properties owned for the years ended December 31, 2021 and 2020 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 years ended December 31, 2021 and 2020. 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 acquisitions and dispositions affect reporting comparability related to our
consolidated financial statements:
Hotel Properties
Location
Acquisition/Disposition Acquisition/Disposition Date
Mr. C Beverly Hills Hotel ................................... Los Angeles, California
Acquisition
August 5, 2021
The following table illustrates the key performance indicators of all hotel properties for the periods indicated:
Occupancy ................................................................................................................
ADR (average daily rate).......................................................................................... $
RevPAR (revenue per available room) ..................................................................... $
Rooms revenue (in thousands) ................................................................................. $
Total hotel revenue (in thousands) ........................................................................... $
Year Ended December 31,
2020
2021
52.47 %
386.45
202.76
280,568
427,542
$
$
$
$
30.27 %
329.83
99.83
136,265
226,974
The following table illustrates the key performance indicators of the 13 hotel properties that were included for the years
ended December 31, 2021 and 2020:
Occupancy ................................................................................................................
ADR (average daily rate).......................................................................................... $
RevPAR (revenue per available room) ..................................................................... $
Rooms revenue (in thousands) ................................................................................. $
Total hotel revenue (in thousands) ........................................................................... $
Year Ended December 31,
2020
2021
52.29 %
387.47
202.61
276,038
420,949
$
$
$
$
30.27 %
329.83
99.83
136,265
226,974
Net Income (Loss) Attributable to the Company. Net loss attributable to the Company decreased $78.6 million, from
$105.3 million for the year ended December 31, 2020 (“2020”), to $26.7 million for the year ended December 31, 2021
(“2021”), as a result of the factors discussed below.
Rooms Revenue. Rooms revenue increased $144.3 million, or 105.9%, to $280.6 million during 2021 compared to 2020.
During 2021, we experienced a 2,220 basis point increase in occupancy and a 17.2% increase in room rates compared to 2020.
The increase in rooms revenue is due to the hotel properties recovering from the COVID-19 pandemic as well as an increase of
$4.5 million associated with the acquisition of the Mr. C Beverly Hills Hotel on August 5, 2021.
90
Fluctuations in rooms revenue between 2021 and 2020 is a result of the changes in occupancy and ADR between 2021 and
2020 as reflected in the table below (dollars in thousands):
Hotel Property
..................................................................................................... $
Comparable
Capital Hilton (1)
Marriott Seattle Waterfront ...................................................................................
The Notary Hotel ....................................................................................................
The Clancy (2)
..........................................................................................................
Sofitel Chicago Magnificent Mile ..........................................................................
Pier House Resort & Spa ........................................................................................
The Ritz-Carlton St. Thomas .................................................................................
Park Hyatt Beaver Creek Resort & Spa .................................................................
Hotel Yountville .....................................................................................................
The Ritz-Carlton Sarasota ......................................................................................
Hilton La Jolla Torrey Pines ..................................................................................
Bardessono Hotel and Spa ......................................................................................
The Ritz-Carlton Lake Tahoe .................................................................................
Total .................................................................................................................... $
Non-comparable
Mr. C Beverly Hills Hotel ...................................................................................... $
Rooms
Revenue
Favorable (Unfavorable)
Occupancy
(change in bps) ADR (change in %)
2,178
9,501
4,540
6,378
8,443
12,817
38,048
4,456
8,347
19,328
7,368
10,924
7,444
139,772
1,132
3,155
1,274
3,645
1,906
2,642
4,067
2,102
2,844
2,304
1,996
2,759
1,217
2,202
4,531
n/a
(18.9) %
7.0 %
6.3 %
(38.0) %
43.6 %
38.9 %
57.7 %
(16.6) %
44.8 %
32.9 %
16.2 %
46.6 %
13.6 %
17.5 %
n/a
_______________
(1) The hotel was closed from April 2020 through mid-August in 2020.
(2) The hotel was being renovated during 2020. Additionally the hotel was closed from April 11, 2020 through September 30, 2020.
Food and Beverage Revenue. Food and beverage revenue increased $40.0 million, or 79.7%, to $90.3 million during 2021
compared to 2020. This increase is primarily driven by the recovery from the COVID-19 pandemic. We experienced an
aggregate increase in food and beverage revenue of $38.9 million at 12 comparable hotel properties as well as an increase of
$1.7 million at the Mr. C Beverly Hills Hotel. These increases were partially offset by a decrease of $505,000 at the Capital
Hilton.
Other Hotel Revenue. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort
fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $16.2 million, or 40.1%, to $56.7
million during 2021 compared to 2020.
The increase is attributable to higher other hotel revenue of $20.3 million at 12 comparable hotel properties and an increase
of $407,000 at the Mr. C Beverly Hills Hotel, partially offset by a decrease of $462,000 at Capital Hilton.
During 2020, we also recognized business interruption revenue of $4.0 million at The Ritz-Carlton St. Thomas as a result
of Hurricane Irma.
Rooms Expense. Rooms expense increased $21.8 million, or 57.2%, to $59.8 million in 2021 compared to 2020. The
increase is attributable to an aggregate increase in rooms expense of $20.6 million at 13 comparable hotel properties due to the
hotel properties recovering from the COVID-19 pandemic and an increase of $1.2 million at the Mr. C Beverly Hills Hotel.
Food and Beverage Expense. Food and beverage expense increased $28.9 million, or 62.6%, to $75.2 million during 2021
compared to 2020.
The increase is attributable to an aggregate increase of $28.7 million at 11 comparable hotel properties and an increase of
$1.5 million at the Mr. C Beverly Hills Hotel, partially offset by an aggregate decrease of $1.2 million at the Capital Hilton and
The Notary Hotel.
Other Operating Expenses. Other operating expenses increased $40.4 million, or 41.1%, to $138.9 million in 2021
compared to 2020. 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 an increase of $6.7
million in direct expenses and $33.7 million in indirect expenses and incentive management fees in 2021 compared to 2020.
91
Direct expenses were 4.9% of total hotel revenue in 2021 and 6.2% in 2020. The increase in direct expenses is associated
with higher revenues as all of our comparable hotel properties are recovering from the COVID-19 pandemic and an increase of
$30,000 at the Mr. C Beverly Hills Hotel.
The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $9.2 million
comprising an increase of $8.2 million at our 13 comparable hotel properties and $943,000 at the Mr. C Beverly Hills Hotel; (ii)
marketing costs of $8.3 million comprising an increase of $7.7 million at our 13 comparable hotel properties and $524,000 at
the Mr. C Beverly Hills Hotel; (iii) repairs and maintenance of $5.3 million comprising an increase of $5.0 million at our 13
comparable hotel properties and $314,000 at the Mr. C Beverly Hills Hotel; (iv) lease expense of $976,000 comprising an
increase of $953,000 at our 13 comparable hotel properties and $23,000 at the Mr. C Beverly Hills Hotel; (v) energy costs of
$3.6 million comprised of an increase of $3.3 million at our 13 comparable hotel properties and $309,000 at the Mr. C Beverly
Hills Hotel; and (vi) incentive management fees of $6.4 million comprising an increase of $6.4 million at our 13 comparable
hotel properties and $65,000 at the Mr. C Beverly Hills Hotel.
Management Fees. Base management fees increased $5.9 million, or 81.9%, to $13.1 million in 2021 compared to 2020.
Management fees increased $5.8 million at 13 comparable hotel properties and $195,000 at the Mr. C Beverly Hills Hotel.
Property Taxes, Insurance and Other. Property taxes, insurance and other increased $6.5 million, or 22.9%, to $35.0
million in 2021 compared to 2020. The increase is comprised of an aggregate increase of approximately $7.3 million at seven
hotel properties. Approximately $6.6 million of the increase is primarily attributable to higher current year assessments at two
hotel properties. The increase also includes $545,000 at the Mr. C Beverly Hills Hotel. These increases were partially offset by
an aggregate decrease of approximately $1.4 million at six hotel properties.
Depreciation and Amortization. Depreciation and amortization increased $391,000, or 0.5%, to $73.8 million for 2021
compared to 2020. The increase is comprised of an increase of $972,000 at the Mr. C Beverly Hills Hotel and an aggregate
increase of $2.6 million at The Clancy, Marriott Seattle Waterfront, Hotel Yountville, The Ritz-Carlton St. Thomas, The Ritz-
Carlton Sarasota and The Ritz-Carlton Lake Tahoe. These increases are partially offset by an aggregate decrease of $3.2 million
at seven comparable hotel properties as a result of fully depreciated assets.
Advisory Services Fee. Advisory services fee increased $4.2 million, or 22.5%, to $22.6 million in 2021 compared to 2020
due to increases in the base advisory fee of $825,000, reimbursable expenses of $507,000, incentive fee of $678,000 as well as
an increase in equity-based compensation of $2.1 million.
In 2021, we recorded an advisory services fee of $22.6 million, which included a base advisory fee of $10.8 million,
reimbursable expenses of $2.3 million and $9.5 million associated with equity grants of our common stock and LTIP units
awarded to the officers and employees of Ashford Inc.
In 2020, we recorded an advisory services fee of $18.5 million, which included a base advisory fee of $10.0 million,
reimbursable expenses of $1.8 million and $7.4 million associated with equity grants of our common stock and LTIP units
awarded to the officers and employees of Ashford Inc. and a credit to the incentive fee of $678,000 as a result of not meeting
the FCCR threshold required for paying the final installment of the incentive fee incurred in 2018.
Gain on Legal Settlement. In 2021, we recognized a gain of $728,000 related to the settlement of a transfer tax matter with
the City of San Francisco and $189,000 related to a billing dispute. In 2020, there was no such gain recognized.
Transaction Costs. In 2021, we recognized $563,000 of transaction costs associated with the acquisition of the Mr. C
Beverly Hills Hotel. There were no transaction costs in 2020.
Corporate General and Administrative. Corporate general and administrative expense was $8.7 million in 2021 and $6.7
million in 2020. The increase in corporate general and administrative expenses is primarily due to higher public company costs
of $658,000, higher miscellaneous expenses of $575,000 and an increase of $1.3 million related to our share of the reimbursed
operating expenses of Ashford Securities, partially offset by lower professional fees of $497,000.
Gain (loss) on Insurance Settlement and Disposition of Assets. In 2020, we recognized a gain of $10.1 million as a result
of finalizing the insurance settlement from Hurricane Irma. In 2021, we recognized a gain of $481,000 associated with proceeds
received from an insurance claim, a gain of $18,000 upon disposition of certain fixed assets, as well as a gain of $197,000
associated with the sale of certain ERFP assets to Ashford Inc.
Equity in Earnings (Loss) of Unconsolidated Entity. In 2021 and 2020, we recorded equity in loss of unconsolidated
entity of $252,000 and $217,000, respectively, related to our investment in OpenKey.
92
Interest Income. Interest income decreased $128,000, or 72.7%, to $48,000 for 2021 compared to 2020.
Other Income (Expense). Other expense decreased $5.1 million, or 100.0% to $0 in 2021 compared to 2020. In 2020, we
recorded a realized loss of $3.6 million and $1.3 million on our disposition of interest rate floors and CMBX credit default
swaps, respectively. We also recorded expense of $191,000 related to CMBX premiums and interest paid on collateral.
Interest Expense and Amortization of Discounts and Loan Costs. Interest expense and amortization of discounts and loan
costs decreased $14.2 million, or 31.5%, to $30.9 million for 2021 compared to 2020. The decrease is primarily due to lower
interest expense from a lower average LIBOR rate, a credit to interest expense related to the amortization of default interest and
late charges recorded on loans that were previously in default and the repayment of our secured term loan. These decreases
were partially offset by higher interest expense from our Convertible Senior Notes and the mortgage loan associated with the
Mr. C Beverly Hills Hotel acquisition. The average LIBOR rates for 2021 and 2020 were 0.10% and 0.52%, respectively.
Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees was $2.0 million in 2021. This included a $1.2
million write-off of unamortized loan costs upon the payoff of our secured term loan payoff and $387,000 of third-party fees
from amendments executed with various lenders, which included deferral of debt service payments and allowed the use of
reserves for property-level operating shortfalls and/or to cover debt service payments. These third-party fees incurred in
conjunction with these amendments were expensed in accordance with applicable accounting guidance. In addition, there was a
write-off of loan costs of approximately $419,000 upon the $20 million pay-down of the mortgage loan assumed with the
acquisition of the Mr. C Beverly Hills Hotel.
Write-off of loan costs and exit fees was $3.9 million for 2020, resulting from amendments executed with various lenders,
which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or
to cover debt service payments. These third-party fees incurred in conjunction with these amendments were expensed in
accordance with applicable accounting guidance.
Unrealized Gain (Loss) on Derivatives. Unrealized gain on derivatives of $32,000 for 2021 consisted of an unrealized gain
of approximately $94,000 on warrants, partially offset by an unrealized loss of approximately $62,000 on interest rate caps.
Unrealized gain on derivatives of $5.0 million for 2020 consisted of a $3.6 million unrealized gain on interest rate floors
associated with the recognition of realized losses and a $1.4 million unrealized gain on CMBX credit default swaps associated
with the recognition of realized losses, partially offset by an unrealized loss of $93,000 on interest rate caps.
Income Tax (Expense) Benefit. Income tax expense changed $5.7 million, from an income tax benefit of $4.4 million in
2020 to income tax expense of $1.3 million in 2021. This change was primarily due to an increase in the profitability of our
TRS entities in 2021 compared to 2020.
(Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities. Our noncontrolling interest partner in
consolidated entities was allocated a loss of $2.7 million and $6.4 million for 2021 and 2020, respectively. At both December
31, 2021 and 2020, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel
properties held by one entity.
Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling
interests in operating partnership were allocated a net loss of $3.6 million and $13.0 million for 2021 and 2020, respectively.
Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 8.83% and 9.43% as of
December 31, 2021 and 2020, respectively.
93
Indebtedness
The following table sets forth our indebtedness (dollars in thousands):
Number of
Assets
Encumbered
Outstanding
Balance at
December 31,
2021
Interest Rate
at
December
31, 2021
Amortization
67,500
3.10 % Interest only
Fully
Extended
Maturity
Date
Apr-2022
Maturity
Date (1)
Apr-2022
Lender/Property(ies)
Securitized (2)
...........................................................................
Park Hyatt Beaver Creek Resort & Spa, Beaver Creek, CO
Securitized (3)
...........................................................................
The Notary Hotel, Philadelphia, PA
The Clancy, San Francisco, CA
Marriott Seattle Waterfront, Seattle, WA
Sofitel Chicago Magnificent Mile, Chicago, IL
Apollo (4)
..................................................................................
The Ritz-Carlton, St. Thomas, USVI
BAML (5)
.................................................................................
The Ritz-Carlton, Sarasota, FL
BAML (6)
..................................................................................
Hotel Yountville, Yountville, CA
BAML (6)
..................................................................................
Bardessono Hotel and Spa, Yountville, CA
BAML (7)
.................................................................................
The Ritz-Carlton, Lake Tahoe, CA
Prudential (8)
.............................................................................
Capital Hilton, Washington, D.C.
Hilton La Jolla Torrey Pines, La Jolla, CA
LoanCore (9)
.............................................................................
Mr. C Beverly Hills Hotel
BAML (10)
................................................................................
Pier House Resort & Spa, Key West, FL
1
4
1
1
1
1
1
2
1
1
435,000
2.26 % Interest only
Jun-2022
Jun-2025
42,500
4.95 % Interest only
Aug-2022
Aug-2024
99,500
2.90 % Amortizing
Apr-2023
Apr-2023
51,000
2.80 % Interest only May-2023 May-2023
40,000
2.80 % Interest only
Aug-2023
Aug-2023
54,000
2.35 % Interest only
Jan-2024
Jan-2024
195,000
1.80 % Interest only
Feb-2024
Feb-2024
30,000
5.10 % Interest only
Aug-2024
Aug-2024
80,000
2.10 % Interest only
Sep-2024
Sep-2024
Convertible Senior Notes .......................................................
Equity
86,250
4.50 % Interest only
June-2026
June-2026
Equity
Total/Weighted Average .........................................................
14 $
1,180,750
2.65 %
__________________
(1) Maturity date assumes no future extensions.
(2)
Interest rate is variable at LIBOR plus 3.00%. This mortgage loan requires that we maintain an interest rate cap agreement with a counterparty, and the
terms of that agreement provide for a LIBOR cap of 3.0%. This mortgage loan includes three one-year extension options subject to satisfaction of certain
conditions, of which the third was exercised in April 2021.
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Interest rate is variable at LIBOR plus 2.16%. This mortgage loan requires that we maintain an interest rate cap agreement with a counterparty, and the
terms of that agreement provide for a LIBOR cap of 4.0%. This mortgage loan includes five one-year extension options subject to the satisfaction of
certain conditions, of which the second was exercised in June 2021.
Interest rate is variable at LIBOR plus 3.95% with a LIBOR floor of 1.00%. This mortgage loan has three one-year extension options, subject to the
satisfaction of certain conditions, of which the first was exercised in August 2021.
Interest rate is variable at LIBOR plus 2.65% with a LIBOR floor of 0.25%. This mortgage loan requires that we maintain an interest rate cap agreement
with a counterparty, and the terms of that agreement provide for a LIBOR cap of 3.5%. The mortgage loan was interest only until July 1, 2021, at which
time it began amortizing 1% annually for the remaining term. The stated maturity is April 2023.
Interest rate is variable at LIBOR plus 2.55%, with a LIBOR floor of 0.25%. This mortgage loan requires that we maintain an interest rate cap agreement
with a counterparty, and the terms of that agreement provide for a LIBOR cap of 3.5%.
Interest rate is variable at LIBOR plus 2.10%, with a LIBOR floor of 0.25%. This mortgage loan requires that we maintain an interest rate cap agreement
with a counterparty, and the terms of that agreement provide for a LIBOR cap of 3.5%.
Interest rate is variable at LIBOR plus 1.70%.
Interest rate is variable at LIBOR plus 3.60%, with a LIBOR floor of 1.50%. This mortgage loan requires that we maintain an interest rate cap agreement
with a counterparty, and the terms of that agreement provide for a LIBOR cap of 2.0%.
Interest rate is variable at LIBOR plus 1.85%, with a LIBOR floor of 0.25%. This mortgage loan requires that we maintain an interest rate cap agreement
with a counterparty, and the terms of that agreement provide for a LIBOR cap of 3.5%.
94
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. A portion of the proceeds were
used to fully repay the secured term loan. See note 6 to our consolidated financial statements for a full description of our
Convertible Senior Notes.
On September 23, 2021, the Company finalized an extension of its mortgage loans for the Bardessono Hotel and Spa with a
final maturity in August 2022 and the Hotel Yountville with a final maturity in May 2022. Each of the loans was extended for
one year beyond its original maturity on the same terms as the original loan.
On February 2, 2022, the Company refinanced its mortgage loan secured by the Park Hyatt Beaver Creek Resort & Spa,
which had a final maturity date in April 2022. The new, non-recourse mortgage loan totals $70.5 million and has a two-year
initial term with three one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is interest
only and provides for a floating interest rate of SOFR + 2.86%.
The following mortgage loans include various financial cash trap triggers. The BAML Pier House mortgage loan, the
BAML Bardessono mortgage loan, the BAML Yountville mortgage loan, the BAML Sarasota mortgage loan and the BAML
Lake Tahoe mortgage loan all have a 1.20x debt service coverage ratio requirement. The Park Hyatt Beaver Creek Resort &
Spa mortgage loan, outstanding at December 31, 2021, had a 10.0% debt yield requirement. The mortgage loan secured by four
hotel properties has a 7.5% debt yield requirement, and the Apollo mortgage loan has a 12.0% debt yield requirement. When
these provisions are triggered, substantially all of the profits generated by the hotel properties securing such loan are 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.
As of December 31, 2021, our $435 million mortgage loan, our $195 million mortgage loan and our $54 million mortgage
loan were in cash traps and approximately $157,000 of our restricted cash was subject to these cash traps. Additionally, at
December 31, 2021, there was approximately $2.4 million of restricted cash, associated with two mortgage loans that were no
longer in cash traps as of that date, which was subsequently released.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has
resulted in significant travel restrictions and extended shutdown of numerous businesses throughout the United States. In March
2020, the World Health Organization declared COVID-19 to be a global pandemic. Beginning in late February 2020, we
experienced a significant decline in occupancy and RevPAR associated with COVID-19 as we experienced significant
reservation cancellations as well as a significant reduction in new reservations. The prolonged presence of the virus has resulted
in health and other government authorities imposing widespread restrictions on travel and other businesses.
As of December 31, 2021, the Company maintained unrestricted cash of $216.0 million and restricted cash of $47.4
million. The vast majority of the restricted cash comprises lender and manager held reserves. At the end of the year, there was
also $27.5 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of
its property managers which is also available to fund hotel operating costs. For the year ended December 31, 2021, cash flows
provided by operating activities were approximately $64.0 million. On March 4, 2022, our board of directors declared a
quarterly cash dividend of $0.01 per diluted share for the Company’s common stock for the first quarter of 2022. Additionally,
in March 2022, the board of directors approved an update to our previously announced dividend policy for 2022 to revise our
then-expectation to pay a quarterly dividend of $0.01 per share of common stock during 2022. The approval of our dividend
policy does not commit our board of directors to declare future dividends with respect to any quantity or the amount thereof.
We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully
subside, whether our hotels will be forced to shut down operations or whether one or more possible recurrences of COVID-19
case surges could result in further reductions in business and personal travel or potentially cause state and local governments to
reinstate travel restrictions. Facts and circumstances could change in the future that are outside of management’s control, such
as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to
COVID-19.
95
Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other
expenditures directly associated with our hotel properties, including:
•
•
•
•
•
•
advisory fees payable to Ashford LLC;
recurring maintenance necessary to maintain our hotel properties in accordance with brand standards;
interest expense and scheduled principal payments on outstanding indebtedness, including our secured term loan (see
“Contractual Obligations and Commitments”);
distributions, if any, in the form of dividends on our common stock, necessary to qualify for taxation as a REIT;
dividends on our preferred stock; and
capital expenditures to improve our hotel properties.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations, capital market
activities 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) 1/12th of the “G&A Ratio” for the most recently completed
fiscal quarter multiplied by our total market capitalization on the last balance sheet date included in the most recent quarterly
report on Form 10-Q or annual report on Form 10-K that we file with the SEC. Thus, even if our total market capitalization and
performance decline, we will still be required to make payments to our advisor equal to the minimum base advisory fee, which
could adversely impact our liquidity and financial condition.
Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotel
properties and redevelopments, renovations, expansions and other capital expenditures that need to be made periodically with
respect to our hotel properties and scheduled debt payments. We expect to meet our long-term liquidity requirements through
various sources of capital, including future common and preferred equity issuances, existing working capital, net cash provided
by operations, hotel mortgage indebtedness and other secured and unsecured borrowings. However, there are a number of
factors that may have a material adverse effect on our ability to access these capital sources, including the current and ongoing
effects of COVID-19 on our business and the hotel industry, 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), working capital, and capital
expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S. federal income tax
purposes.
Our hotel properties will require periodic capital expenditures and renovation to remain competitive. In addition,
acquisitions, redevelopments or expansions of hotel properties may require significant capital outlays. We may not be able to
fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90%
of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to
qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our
ability to fund capital expenditures, acquisitions or hotel redevelopment through retained earnings is very limited.
Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to
obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects
could be materially and adversely affected.
Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties
decline. 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 some of our mortgage loans, as discussed
above. Our loans may remain subject to 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.
Our estimated future obligations as of December 31, 2021 include both current and long-term obligations. With respect to
our indebtedness, as discussed in note 6 to our consolidated financial statements, we have current obligations of $546.0 million
and long-term obligations of $634.8 million. As of December 31, 2021, we held extension options to extend the principal for all
96
of the debt due in the next twelve months except for $68.5 million. $67.5 million relates to the mortgage loan secured by the
Park Hyatt Beaver Creek Resort & Spa that was refinanced on February 2, 2022. Additionally we have mortgage loan payments
of approximately $1.0 million due in the next twelve months.
As discussed in note 17 to our consolidated financial statements, under our operating leases we have current obligations of
approximately $3.3 million and long-term obligations of approximately $156.9 million. Additionally, as discussed in note 16 to
our consolidated financial statements, we have short-term capital commitments of approximately $23.0 million.
Equity Transactions
On December 5, 2017, our board of directors approved the stock 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 and
preferred stock having an aggregate value of up to $50 million. The board of directors’ authorization replaced any previous
repurchase authorizations. No shares were repurchased during the year ended December 31, 2021, pursuant to this
authorization.
On December 11, 2017, we entered into equity distribution agreements with certain sales agents to sell from time to time
shares of our common stock having an aggregate offering price of up to $50.0 million. Sales of shares of our common stock, if
any, 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, including sales made directly on the NYSE, the existing trading market for our common 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 common stock sold through such sales agent. On July 7, 2020, we entered into a side letter (the “Side Letter”) with the
sales agents pursuant to which we agreed to pay all reasonable documented out-of-pocket expenses, including the reasonable
fees and disbursements of counsel incurred by the sales agents, in connection with the ongoing services contemplated by the
equity distribution agreements (subject to a $75,000 cap on certain expenses incurred in June 2020). Pursuant to the Side Letter,
the sales agents have agreed to reimburse us for up to $50,000 of such expenses, if the sales agents offer and sell an amount of
our common stock with an aggregate offering price of $15,000,000, and have agreed to reimburse us for up to an additional
$50,000 of such expenses, provided the sales agents offer and sell an amount of our common stock with an aggregate offering
price of $30,000,000. As of March 8, 2022, the Company has sold approximately 7.4 million shares of common stock and
received gross proceeds of approximately $30.8 million under this program.
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. As of March 8, 2022, the Company has issued approximately 2.9 million shares of Series E
Preferred Stock and received net proceeds of approximately $65.4 million and issued approximately 37,000 shares of Series M
Preferred Stock and received net proceeds of approximately $892,000. The Company also issued approximately 4,000 shares of
Series E Preferred Stock pursuant to the dividend reinvestment plan.
On December 4, 2019, we entered into equity distribution agreements with certain sales agents to sell from time to time
shares of our 5.50% Series B Cumulative Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) having an
aggregate offering price of up to $40.0 million. Sales of shares of the 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, including sales made directly on the NYSE, the existing trading market for the 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
97
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 the Series B Convertible Preferred Stock sold through such sales agents. Since the inception of the program, we issued
approximately 63,000 shares of the Series B Convertible Preferred Stock through our “at-the-market” equity offering program
resulting in gross proceeds of approximately $1.0 million before discounts and commissions to the selling agents of
approximately $19,000.
On February 4, 2021, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN,
Ltd. (“YA”), pursuant to which the Company will be able to sell up to 7,780,786 shares of its common stock (the “Commitment
Amount”) at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating
on the earliest of (i) the first day of the month next following the 36-month anniversary of the SEDA or (ii) the date on which
YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s
common stock equal to the Commitment Amount (the “Commitment Period”). Other than with respect to the Initial Advance
(as defined below) the shares sold to YA pursuant to the SEDA would be purchased at 95% of the Market Price (as defined
below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it
owning more than 4.99% of the Company’s common stock. “Market Price” means the lowest daily VWAP of the Company’s
common stock during the five consecutive trading days commencing on the trading day following the date the Company
submits an advance notice to YA. “VWAP” means, for any trading day, the daily volume weighted average price of the
Company’s common stock for such date on the principal market as reported by Bloomberg L.P. during regular trading hours.
At any time during the Commitment Period the Company may require YA to purchase shares of the Company’s common
stock by delivering a written notice to YA setting forth the Advance Shares (as defined in the SEDA) that the Company desires
to issue and sell to YA (the “Advance Notice”). The Company may deliver an Advance Notice for an initial Advance for up to
1,200,000 Advance Shares (the “Initial Advance”). The preliminary purchase price per share for such shares shall be 100% of
the average daily VWAP for the five consecutive trading days immediately prior to the date of the Advance Notice.
Pursuant to the SEDA, we currently intend to use the net proceeds from any sale of the shares for working capital purposes,
including the repayment of outstanding debt. There are no other restrictions on future financing transactions. The SEDA does
not contain any right of first refusal, participation rights, penalties or liquidated damages. We are not required to pay any
additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $10,000
structuring fee. As of March 8, 2022, the Company has sold approximately 1.7 million shares of common stock and received
proceeds of approximately $10.0 million under the SEDA.
From March 16, 2021 through March 8, 2022, Braemar entered into privately negotiated exchange agreements with certain
holders of the Series B Convertible Preferred Stock in reliance on Section 3(a)(9) of the Securities Act. The Company agreed to
exchange a total of approximately 2.0 million shares of its Series B Convertible Preferred stock for approximately 7.3 million
shares of its common stock.
On April 21, 2021, the Company entered into a purchase agreement (the “Lincoln Park Purchase Agreement”) with Lincoln
Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company may issue or sell to Lincoln Park up to 8,893,565
shares of the Company’s common stock from time to time during the term of the Lincoln Park Purchase Agreement. The
issuance of the shares of common stock pursuant to the Lincoln Park Purchase Agreement has been registered pursuant to the
Company’s shelf registration statement on Form S-3 (the “Registration Statement”), and the related base prospectus included in
the Registration Statement, as supplemented by a prospectus supplement filed with the SEC on April 21, 2021. The Company
and Lincoln Park also entered into a registration rights agreement, pursuant to which the Company agreed to maintain the
effectiveness of the Registration Statement. Upon entering into the Lincoln Park Purchase Agreement, the Company issued
15,000 shares of the Company’s common stock as consideration for Lincoln Park’s execution and delivery of the Lincoln Park
Purchase Agreement. As of March 8, 2022, the Company has issued approximately 766,000 shares of common stock for gross
proceeds of approximately $4.2 million under the Lincoln Park Purchase Agreement.
On May 25, 2021, the Company entered into an equity distribution agreement (the “Virtu May 2021 EDA”) with Virtu
Americas LLC (“Virtu”), to sell from time to time shares of our common stock having an aggregate offering price of up to $50
million. We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock
sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a
price agreed upon at the time of sale. As of March 8, 2022, the Company has sold approximately 8.3 million shares of common
stock under the Virtu May 2021 EDA and received gross proceeds of approximately $50.0 million. All shares of common stock
under the Virtu May 2021 EDA have been sold.
On July 12, 2021, the Company entered into a second equity distribution agreement (the “Virtu July 2021 EDA”)with Virtu
to sell from time to time shares of our common stock having an aggregate offering price of up to $100 million. We will pay
Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may
also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the
98
time of sale. As of March 8, 2022, the Company has sold approximately 4.7 million shares of common stock under the Virtu
July 2021 EDA and received gross proceeds of approximately $24.0 million.
Debt Transactions
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 (the “Base 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.
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. 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.
On September 23, 2021, the Company finalized an extension of its mortgage loans for the Bardessono Hotel and Spa with a
final maturity in August 2022 and the Hotel Yountville with a final maturity in May 2022. Each of the loans was extended for
one year beyond its original maturity on the same terms as the original loan.
On February 2, 2022, the Company refinanced its mortgage loan secured by the Park Hyatt Beaver Creek Resort & Spa,
which had a final maturity date in April 2022. The new, non-recourse mortgage loan totals $70.5 million and has a two-year
initial term with three one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is interest
only and provides for a floating interest rate of SOFR + 2.86%.
Sources and Uses of Cash
We had approximately $216.0 million and $78.6 million of cash and cash equivalents at December 31, 2021 and
December 31, 2020, respectively.
We anticipate using funds to pay for (i) capital expenditures for our 14 hotel properties, estimated to be approximately $60
million to $70 million in fiscal year 2022 and (ii) debt interest payments are estimated to be approximately $30.2 million in
2022 based on future payments using the one month LIBOR rate as of December 31, 2021. This estimate will fluctuate based
on changes in the one-month LIBOR rate.
Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by (used in) operating activities were
$64.0 million and $(50.3) million for the years ended December 31, 2021 and 2020, respectively. Cash flows from operations
were impacted by the COVID-19 pandemic and changes in hotel operations of our 13 comparable hotel properties as well the
acquisition of the Mr. C Beverly Hills Hotel on August 5, 2021. Cash flows from operations are also impacted by the timing of
working capital cash flows such as collecting receivables from hotel guests, paying vendors, settling with derivative
counterparties, settling with related parties, settling with hotel managers and timing differences between the receipt of proceeds
from business interruption insurance claims and the recognition of the related revenue.
Net Cash Flows Provided by (Used in) Investing Activities. For the year ended December 31, 2021, net cash flows used in
investing activities were $41.7 million. These cash outflows were primarily attributable to $25.6 million of capital
improvements made to various hotel properties, approximately $17.6 million associated with the acquisition of the Mr. C
99
Beverly Hills Hotel and earnest money associated with the pending acquisition of Dorado Beach, a Ritz-Carlton Reserve,
partially offset by proceeds of $1.8 million from the sale of certain ERFP assets to Ashford Inc.
For the year ended December 31, 2020, net cash flows used in investing activities were $16.5 million. These cash outflows
were primarily attributable to $25.6 million of capital improvements made to various hotel properties offset by $9.0 million of
insurance proceeds related to Hurricane Irma.
Net Cash Flows Provided by (Used in) Financing Activities. For the year ended December 31, 2021, net cash flows
provided by financing activities were $128.0 million. Cash inflows primarily consisted of net proceeds of $83.2 million from
the issuance of our Convertible Senior Notes, $102.5 million from the issuance of common stock, $36.9 million from the
issuance of preferred stock and contributions of $1.2 million from a noncontrolling interest in consolidated entities. The cash
inflows were partially offset by repayments of indebtedness of $84.2 million, $9.1 million of dividend and distribution
payments and $1.9 million of payments for loan costs and fees.
For the year ended December 31, 2020, net cash flows provided by financing activities were $49.6 million. Cash inflows
primarily consisted of borrowings on indebtedness of $109.3 million, net proceeds of $13.3 million from the “at-the-market”
common stock offering and $474,000 from the issuance of preferred stock, partially offset by repayments of indebtedness of
$47.8 million, $16.2 million of dividend and distribution payments, $6.5 million of payments for loan costs and fees associated
with loan forbearance, and distributions of $2.6 million to the holder of a noncontrolling interest in consolidated entities.
Inflation
We rely entirely on the performance of our properties and the ability of the properties’ managers to increase revenues to
keep pace with inflation. Hotel operators can generally increase room rates rather quickly, but competitive pressures may limit
their ability to raise rates faster than inflation. Our general and administrative costs, real estate and personal property taxes,
property and casualty insurance, and utilities are subject to inflation as well.
Critical Accounting Policies
Our accounting policies are fully described in note 2 to our consolidated financial statements included in “Item 8. Financial
Statements and Supplementary Data.” We believe that the following discussion addresses our most critical accounting policies,
representing those policies considered most vital to the portrayal of our financial condition and results of operations and require
management’s most difficult, subjective and complex judgments.
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. There was no impairment charge recorded for the year ended December 31, 2021.
Income Taxes. At December 31, 2021 and 2020, we had a valuation allowance of approximately $17.3 million and $14.9
million, respectively, to partially reserve our deferred tax assets of our TRSs. At each reporting date, we evaluate whether it is
more likely than not that we will utilize all or a portion of our deferred tax assets. We consider all available positive and
negative evidence, including historical results of operations, projected future taxable income, carryback potential and scheduled
reversals of deferred tax liabilities. In evaluating the objective evidence that historical results provide, we consider three years
of consolidated cumulative operating income (loss). At December 31, 2021, we had TRS net operating loss carry forwards for
U.S. federal income tax purposes of $61.2 million, of which $52.3 million is subject to expiration and will begin to expire in
2023. The remainder was generated after December 31, 2017 and is not subject to expiration under the Tax Cuts and Jobs Act.
The loss carry forwards subject to expiration may be available to offset future taxable income, if any, for 2023 through 2034,
with the remainder available to offset taxable income beyond 2034; however, there could be substantial limitations on their use
imposed by the Code. Management determined that it is more likely than not that $17.3 million of our net deferred tax assets
will not be realized and a valuation allowance has been recorded accordingly.
100
The “Income Taxes” Topic of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification
(“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 and various states and cities. Tax years
2017 through 2021 remain subject to potential examination by certain federal and state taxing authorities.
Recently Adopted Accounting Standards
In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments-Equity Method
and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321,
Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) (“ASU 2020-01”), which clarifies the interaction
between the accounting for equity securities, equity method investments, and certain derivative instruments. The ASU, among
other things, clarifies that a company should consider observable transactions that require a company to either apply or
discontinue the equity method of accounting under Topic 323, Investments-Equity Method and Joint Ventures, for the purposes
of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the
equity method. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those
fiscal years and should be applied prospectively. We adopted the standard effective January 1, 2021, and the adoption of this
standard did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04
contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.
The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In January
2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”) to provide guidance and
relief for transitioning to alternative reference rates. ASU 2021-01 is effective immediately for all entities. The Company
continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and
Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with
characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible
preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires
entities to account for beneficial conversion features and cash conversion features in equity, separately from the host
convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding
financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’
equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per
Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted
method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be
settled in cash or shares. For SEC filers, excluding smaller reporting companies, this ASU is effective for fiscal years beginning
after December 15, 2021 including interim periods within those fiscal years. Entities should adopt the guidance as of the
beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. We plan to adopt ASU
2020-06 through the modified retrospective method on January 1, 2022. Upon adoption, the Convertible Senior Notes will be
recorded as a single debt instrument at amortized cost, instead of being recorded as both a liability and equity. The Company
will also cease recording non-cash interest expense associated with amortization of the debt discount associated with the
conversion features. The adoption of ASU 2020-06 will result in an adjustment to additional paid-in capital, accumulated
deficit, and the carrying value of our Convertible Senior Notes. The impact of adopting ASU 2020-06 will be an increase to
“indebtedness, net” and a decrease to stockholders’ equity of approximately $5.6 million. We do not expect the adoption of this
standard to have a material impact on our consolidated financial statements, beyond the impact to our Convertible Senior Notes
described above.
Non-GAAP Financial Measures
The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, Funds From Operations (“FFO”)
and Adjusted FFO are presented to help our investors evaluate our operating performance.
101
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 excluded impairment on real estate, (gain) loss on insurance settlement and disposition of assets and
Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by
NAREIT.
We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable)
contract assets (liabilities), transaction and conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement
costs, advisory services incentive fee, other/income expense, Company’s portion of adjustments to EBITDAre of OpenKey and
non-cash items such as unrealized gain/ loss on derivatives and stock/unit-based compensation.
We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they reflect more accurately the ongoing
performance of our hotel assets and other investments and provide more useful information to investors as they are indicators of
our ability to meet our future debt payment requirements, working capital requirements and they provide an overall evaluation
of our financial condition. EBITDA, EBITDAre and Adjusted EBITDAre as calculated by us may not be comparable to
EBITDA, EBITDAre and Adjusted EBITDAre reported by other companies that do not define EBITDA, EBITDAre and
Adjusted EBITDAre exactly as we define the terms. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash
generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to
operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to
cash flows from operating activities as determined by GAAP as an indicator of liquidity.
The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands)
(unaudited):
Net income (loss) .................................................................................................................................................. $
Interest expense and amortization of loan costs .............................................................................................
Depreciation and amortization ........................................................................................................................
Income tax expense (benefit) ..........................................................................................................................
Equity in (earnings) loss of unconsolidated entity ...........................................................................................
Company’s portion of EBITDA of OpenKey ..................................................................................................
EBITDA ................................................................................................................................................................
(Gain) loss on insurance settlement and disposition of assets .........................................................................
EBITDAre ............................................................................................................................................................
Amortization of favorable (unfavorable) contract assets (liabilities) ..............................................................
Transaction and conversion costs ....................................................................................................................
Other (income) expense ...................................................................................................................................
Write-off of loan costs and exit fees ................................................................................................................
Unrealized (gain) loss on investment in Ashford Inc. .....................................................................................
Unrealized (gain) loss on derivatives ...............................................................................................................
Non-cash stock/unit-based compensation ........................................................................................................
Legal, advisory and settlement costs ...............................................................................................................
Company’s portion of adjustments to EBITDAre of OpenKey ......................................................................
Adjusted EBITDAre ............................................................................................................................................ $
Year Ended December 31,
2021
2020
2019
(32,911) $
(124,677) $
30,901
73,762
1,324
252
(250)
73,078
(696)
72,382
512
2,637
—
1,963
—
(32)
10,204
(208)
7
45,104
73,371
(4,406)
217
(214)
(10,605)
(10,149)
(20,754)
834
1,370
5,126
3,920
—
(4,959)
7,892
2,023
13
1,196
54,507
70,112
1,764
199
(195)
127,583
(25,165)
102,418
651
2,076
13,947
647
(7,872)
1,103
7,943
527
25
87,465 $
(4,535) $
121,465
102
l
e
t
o
h
r
u
o
f
o
h
c
a
e
r
o
f
s
i
s
a
b
y
t
r
e
p
o
r
p
-
y
b
-
y
t
r
e
p
o
r
p
a
n
o
s
r
e
d
l
o
h
t
i
n
u
P
O
d
n
a
y
n
a
p
m
o
C
e
h
t
o
t
e
l
b
a
t
u
b
i
r
t
t
a
A
D
T
I
B
E
o
t
)
s
s
o
l
(
e
m
o
c
n
i
t
e
n
s
e
l
i
c
n
o
c
e
r
e
l
b
a
t
g
n
i
w
o
l
l
o
f
e
h
T
e
t
a
d
n
o
i
t
i
s
i
u
q
c
a
s
t
i
m
o
r
f
d
e
d
u
l
c
n
i
e
r
a
l
e
t
o
H
s
l
l
i
H
y
l
r
e
v
e
B
C
.
r
M
e
h
T
f
o
s
t
l
u
s
e
r
e
h
T
.
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
r
a
e
y
e
h
t
g
n
i
r
u
d
s
i
s
a
b
e
t
a
r
o
p
r
o
c
a
n
o
d
n
a
d
e
n
w
o
s
e
i
t
r
e
p
o
r
p
:
)
d
e
t
i
d
u
a
n
u
(
)
s
d
n
a
s
u
o
h
t
n
i
(
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
h
g
u
o
r
h
t
l
e
t
o
H
l
a
t
o
T
C
.
r
M
y
l
r
e
v
e
B
-
z
t
i
R
e
h
T
n
o
t
l
r
a
C
.
t
S
t
t
o
i
r
r
a
M
e
l
t
t
a
e
S
l
e
t
o
H
s
l
l
i
H
s
a
m
o
h
T
t
n
o
r
f
r
e
t
a
W
-
z
t
i
R
e
h
T
n
o
t
l
r
a
C
e
k
a
L
e
o
h
a
T
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
E
r
a
e
Y
e
h
T
-
z
t
i
R
n
o
t
l
r
a
C
a
t
o
s
a
r
a
S
e
h
T
y
c
n
a
l
C
e
h
T
y
r
a
t
o
N
l
e
t
o
H
k
r
a
P
t
t
a
y
H
r
e
v
a
e
B
k
e
e
r
C
&
t
r
o
s
e
R
a
p
S
l
e
t
o
H
e
l
l
i
v
t
n
u
o
Y
r
e
i
P
e
s
u
o
H
&
t
r
o
s
e
R
a
p
S
o
n
o
s
s
e
d
r
a
B
d
n
a
l
e
t
o
H
a
p
S
l
e
t
i
f
o
S
o
g
a
c
i
h
C
t
n
e
c
i
f
i
n
g
a
M
e
l
i
M
n
o
t
l
i
H
a
l
l
o
J
a
L
y
e
r
r
o
T
s
e
n
i
P
l
a
t
i
p
a
C
n
o
t
l
i
H
8
6
3
,
7
1
$
)
0
3
6
,
1
(
$
3
5
4
,
7
1
$
)
3
9
2
(
$
3
9
7
,
2
$
2
4
3
,
5
1
$
)
7
6
4
,
5
1
(
$
)
1
6
2
,
6
(
$
5
0
0
,
4
$
0
1
3
,
2
$
1
1
4
,
3
1
$
3
5
0
,
5
$
)
1
8
1
,
0
1
(
$
5
1
9
,
1
$
)
2
8
0
,
1
1
(
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
)
1
1
9
,
2
3
(
$
)
9
7
2
,
0
5
(
—
—
5
9
6
,
8
2
6
0
2
,
2
2
6
7
,
3
7
4
2
3
,
1
)
4
5
(
9
3
7
1
1
,
5
1
6
2
9
—
3
7
2
,
1
r
a
m
e
a
r
B
&
s
l
e
t
o
H
s
t
r
o
s
e
R
.
c
n
I
)
1
(
d
e
t
a
c
o
l
l
/
e
t
a
r
o
p
r
o
C
A
$
—
)
2
3
9
,
1
(
2
3
9
,
1
4
6
6
9
3
)
7
5
1
(
1
6
7
5
2
1
4
5
)
9
3
(
1
5
8
7
5
,
3
1
0
8
2
,
1
2
6
7
,
3
7
6
3
9
—
4
4
6
6
6
2
7
9
—
)
2
(
)
1
7
6
(
4
3
1
,
2
8
6
1
0
1
1
7
0
,
8
—
)
2
1
(
4
5
—
—
5
6
9
,
3
1
—
5
0
2
,
1
4
4
1
1
3
9
,
2
—
1
)
2
2
(
8
1
5
,
3
2
5
3
7
4
3
,
6
—
—
)
3
(
—
—
—
—
—
—
—
—
4
1
5
7
0
,
2
—
)
5
(
)
7
(
—
)
1
4
1
(
)
1
1
(
8
5
2
,
3
1
3
3
3
,
8
6
2
5
,
3
—
—
0
8
1
3
0
3
,
1
2
7
5
,
2
—
8
6
)
6
9
(
—
6
0
6
,
1
4
9
2
3
8
8
,
2
—
)
7
1
1
(
—
2
6
1
9
3
0
,
1
1
8
5
,
2
—
)
9
5
(
0
9
4
—
—
—
—
—
—
—
—
—
—
—
—
.
.
.
.
.
.
)
2
(
s
t
n
e
m
t
s
u
j
d
a
y
t
r
e
p
o
r
p
-
n
o
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
s
e
r
e
t
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
s
n
e
p
x
e
t
s
e
r
e
t
n
I
.
.
.
.
.
.
.
.
.
s
t
s
o
c
n
a
o
l
f
o
n
o
i
t
a
z
i
t
r
o
m
A
2
8
5
,
6
3
9
2
,
4
8
4
4
,
7
.
.
.
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
i
c
e
r
p
e
D
—
9
3
)
3
4
(
0
7
—
2
9
2
.
.
.
.
.
)
t
i
f
e
n
e
b
(
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
e
m
o
c
n
i
(
e
s
n
e
p
x
e
p
i
h
s
r
e
n
w
o
A
D
T
I
B
E
l
e
t
o
h
-
n
o
N
g
n
i
d
u
l
c
n
i
A
D
T
I
B
E
l
e
t
o
H
o
t
e
l
b
a
t
u
b
i
r
t
t
a
s
t
n
u
o
m
a
6
7
0
,
3
7
)
0
1
9
,
4
3
(
6
8
9
,
7
0
1
2
5
0
,
1
0
5
5
,
7
2
7
5
5
,
3
5
3
8
,
7
3
6
6
,
5
2
)
7
1
2
,
2
(
4
2
9
,
1
9
0
6
,
9
3
3
4
,
6
9
3
0
,
8
1
8
0
2
,
9
)
0
6
5
,
3
(
5
3
2
,
6
)
2
4
3
,
3
(
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
8
7
0
,
3
7
$
)
5
8
1
,
4
3
(
$
3
6
2
,
7
0
1
$
2
5
0
,
1
$
0
5
5
,
7
2
$
7
5
5
,
3
$
5
3
8
,
7
$
3
6
6
,
5
2
$
)
7
1
2
,
2
(
$
4
2
9
,
1
$
9
0
6
,
9
$
3
3
4
,
6
$
9
3
0
,
8
1
$
8
0
2
,
9
$
)
0
6
5
,
3
(
$
3
7
6
,
4
$
)
3
0
5
,
2
(
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
r
e
d
l
o
h
t
i
n
u
.
s
e
s
n
e
p
x
e
l
a
g
e
l
d
n
a
e
c
n
a
r
u
s
n
i
,
s
e
x
a
t
e
t
a
r
o
p
r
o
c
,
y
t
r
e
p
o
r
p
l
e
t
o
h
f
o
e
l
a
s
n
o
n
i
a
g
s
a
h
c
u
s
,
s
e
i
t
r
e
p
o
r
p
l
e
t
o
h
o
t
c
i
f
i
c
e
p
s
t
o
n
e
r
e
w
h
c
i
h
w
s
t
n
u
o
m
a
d
e
t
a
c
o
l
l
a
s
e
d
u
l
c
n
I
.
l
e
v
e
l
y
t
r
e
p
o
r
p
l
e
t
o
h
l
a
u
d
i
v
i
d
n
i
e
h
t
t
a
d
e
d
r
o
c
e
r
t
o
n
s
e
s
n
e
p
x
e
s
t
n
e
s
e
r
p
e
R
)
1
(
)
2
(
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
—
2
5
2
3
2
7
2
5
2
)
0
5
2
(
)
0
5
2
(
)
3
2
7
(
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
2
6
5
,
1
(
9
3
8
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
s
t
n
e
m
t
s
u
j
d
a
A
D
T
I
B
E
:
s
s
e
L
d
e
t
a
d
i
l
o
s
n
o
c
o
t
e
l
b
a
t
u
b
i
r
t
t
a
—
—
—
—
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
i
t
i
t
n
e
d
e
t
a
d
i
l
o
s
n
o
c
n
u
f
o
)
s
s
o
l
(
s
g
n
i
n
r
a
e
n
i
y
t
i
u
q
E
A
D
T
I
B
E
f
o
n
o
i
t
r
o
p
s
’
y
n
a
p
m
o
C
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
y
e
K
n
e
p
O
f
o
o
t
e
l
b
a
t
u
b
i
r
t
t
a
A
D
T
I
B
E
l
e
t
o
H
P
O
d
n
a
y
n
a
p
m
o
C
e
h
t
103
l
e
t
o
h
r
u
o
f
o
h
c
a
e
r
o
f
s
i
s
a
b
y
t
r
e
p
o
r
p
-
y
b
-
y
t
r
e
p
o
r
p
a
n
o
s
r
e
d
l
o
h
t
i
n
u
P
O
d
n
a
y
n
a
p
m
o
C
e
h
t
o
t
e
l
b
a
t
u
b
i
r
t
t
a
A
D
T
I
B
E
o
t
)
s
s
o
l
(
e
m
o
c
n
i
t
e
n
s
e
l
i
c
n
o
c
e
r
e
l
b
a
t
g
n
i
w
o
l
l
o
f
e
h
T
:
)
d
e
t
i
d
u
a
n
u
(
)
s
d
n
a
s
u
o
h
t
n
i
(
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
r
a
e
y
e
h
t
g
n
i
r
u
d
s
i
s
a
b
e
t
a
r
o
p
r
o
c
a
n
o
d
n
a
d
e
n
w
o
s
e
i
t
r
e
p
o
r
p
r
a
m
e
a
r
B
&
s
l
e
t
o
H
.
c
n
I
s
t
r
o
s
e
R
/
)
1
(
d
e
t
a
c
o
l
l
A
e
t
a
r
o
p
r
o
C
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
E
r
a
e
Y
l
e
t
o
H
l
a
t
o
T
-
z
t
i
R
e
h
T
.
t
S
n
o
t
l
r
a
C
s
a
m
o
h
T
t
t
o
i
r
r
a
M
e
l
t
t
a
e
S
t
n
o
r
f
r
e
t
a
W
-
z
t
i
R
e
h
T
n
o
t
l
r
a
C
e
k
a
L
e
o
h
a
T
-
z
t
i
R
e
h
T
n
o
t
l
r
a
C
a
t
o
s
a
r
a
S
e
h
T
y
c
n
a
l
C
e
h
T
y
r
a
t
o
N
l
e
t
o
H
t
t
a
y
H
k
r
a
P
r
e
v
a
e
B
k
e
e
r
C
&
t
r
o
s
e
R
a
p
S
l
e
t
o
H
e
l
l
i
v
t
n
u
o
Y
r
e
i
P
e
s
u
o
H
&
t
r
o
s
e
R
a
p
S
o
n
o
s
s
e
d
r
a
B
d
n
a
l
e
t
o
H
a
p
S
l
e
t
i
f
o
S
o
g
a
c
i
h
C
t
n
e
c
i
f
i
n
g
a
M
e
l
i
M
a
L
n
o
t
l
i
H
a
l
l
o
J
y
e
r
r
o
T
s
e
n
i
P
l
a
t
i
p
a
C
n
o
t
l
i
H
—
—
5
9
6
,
1
4
9
0
4
,
3
1
7
3
,
3
7
0
0
1
6
3
3
,
9
3
6
9
,
4
2
2
4
2
,
2
—
)
0
0
1
(
)
1
(
)
6
3
3
,
9
(
)
9
4
1
,
0
1
(
2
3
7
,
6
1
7
6
1
,
1
1
7
3
,
3
7
4
0
1
3
8
2
,
2
0
8
3
,
7
)
6
0
4
,
4
(
)
9
0
6
,
3
(
)
7
9
7
(
)
3
8
(
—
)
7
2
(
—
—
—
9
4
9
,
3
5
3
1
—
6
3
1
9
6
7
,
1
2
7
7
,
2
—
0
5
2
)
9
2
(
4
3
6
,
4
4
3
3
2
9
9
,
5
—
—
)
8
1
1
,
4
(
8
1
1
,
4
6
4
2
6
4
3
8
6
9
5
1
6
—
)
9
(
—
—
—
)
6
(
—
—
—
3
6
4
)
1
1
(
8
5
2
8
2
0
,
2
1
8
6
7
,
8
—
—
3
1
1
8
2
,
2
2
6
5
,
4
—
5
2
3
8
2
1
—
5
6
8
,
1
3
5
1
1
4
4
,
2
—
9
9
)
7
7
6
,
4
2
1
(
$
)
9
5
9
,
2
5
(
$
)
8
1
7
,
1
7
(
$
4
4
8
,
4
$
)
1
0
0
,
6
(
$
)
3
1
9
,
3
(
$
)
4
9
2
(
$
)
7
7
1
,
6
1
(
$
)
2
4
6
,
0
1
(
$
)
4
0
2
,
2
(
$
)
2
7
7
,
4
(
$
6
6
7
0
0
2
—
6
2
4
,
2
2
8
2
6
0
0
,
3
—
7
2
$
)
0
6
3
,
4
(
$
)
0
3
2
,
2
1
(
$
)
3
1
0
,
4
(
$
)
2
2
7
,
2
1
(
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
0
0
1
—
4
7
4
,
1
5
4
1
6
2
1
,
3
—
—
—
—
—
—
7
6
6
,
6
—
)
6
1
(
—
—
)
3
0
7
(
2
3
0
,
5
3
3
5
5
7
1
3
5
—
)
2
1
(
—
—
.
.
.
.
.
.
.
.
.
)
2
(
s
t
n
e
m
t
s
u
j
d
a
y
t
r
e
p
o
r
p
-
n
o
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
s
e
r
e
t
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
s
n
e
p
x
e
t
s
e
r
e
t
n
I
.
.
.
.
.
.
.
.
.
.
.
.
s
t
s
o
c
n
a
o
l
f
o
n
o
i
t
a
z
i
t
r
o
m
A
8
4
6
,
7
.
.
.
.
.
.
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
i
c
e
r
p
e
D
—
0
1
.
.
.
.
.
.
.
.
)
t
i
f
e
n
e
b
(
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
e
m
o
c
n
i
(
e
s
n
e
p
x
e
p
i
h
s
r
e
n
w
o
A
D
T
I
B
E
l
e
t
o
h
-
n
o
N
s
t
n
u
o
m
a
g
n
i
d
u
l
c
n
i
A
D
T
I
B
E
l
e
t
o
H
g
n
i
l
l
o
r
t
n
o
c
n
o
n
o
t
e
l
b
a
t
u
b
i
r
t
t
a
)
8
0
6
,
0
1
(
)
5
4
0
,
4
2
(
7
3
4
,
3
1
4
2
6
,
4
)
3
3
7
,
1
(
7
6
8
,
1
2
0
5
,
1
1
)
5
9
6
,
3
(
)
3
3
6
,
1
(
7
7
9
,
4
)
6
8
(
7
0
7
,
6
8
1
0
,
1
)
8
8
3
,
5
(
3
5
3
)
6
7
0
,
5
(
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
s
e
r
e
t
n
i
—
7
1
2
)
4
1
2
(
)
4
1
2
(
7
1
2
—
—
)
1
8
1
,
1
(
1
8
1
,
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
5
0
6
,
0
1
(
$
)
3
2
2
,
5
2
(
$
8
1
6
,
4
1
$
4
2
6
,
4
$
)
3
3
7
,
1
(
$
7
6
8
,
1
$
2
0
5
,
1
1
$
)
5
9
6
,
3
(
$
)
3
3
6
,
1
(
$
7
7
9
,
4
$
)
6
8
(
$
7
0
7
,
6
$
8
1
0
,
1
$
)
8
8
3
,
5
(
$
5
6
2
$
)
7
0
8
,
3
(
$
)
8
8
(
9
6
2
,
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
s
t
n
e
m
t
s
u
j
d
a
A
D
T
I
B
E
:
s
s
e
L
d
e
t
a
d
i
l
o
s
n
o
c
o
t
e
l
b
a
t
u
b
i
r
t
t
a
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
i
t
i
t
n
e
d
e
t
a
d
i
l
o
s
n
o
c
n
u
f
o
)
s
s
o
l
(
s
g
n
i
n
r
a
e
n
i
y
t
i
u
q
E
f
o
A
D
T
I
B
E
f
o
'
n
o
i
t
r
o
p
s
y
n
a
p
m
o
C
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
y
e
K
n
e
p
O
.
.
.
.
.
.
.
.
s
r
e
d
l
o
h
t
i
n
u
P
O
d
n
a
y
n
a
p
m
o
C
e
h
t
o
t
e
l
b
a
t
u
b
i
r
t
t
a
A
D
T
I
B
E
l
e
t
o
H
_
_
_
_
_
_
_
_
_
_
_
_
_
104
.
s
e
s
n
e
p
x
e
l
a
g
e
l
d
n
a
e
c
n
a
r
u
s
n
i
,
s
e
x
a
t
e
t
a
r
o
p
r
o
c
,
y
t
r
e
p
o
r
p
l
e
t
o
h
f
o
e
l
a
s
n
o
n
i
a
g
s
a
h
c
u
s
,
s
e
i
t
r
e
p
o
r
p
l
e
t
o
h
o
t
c
i
f
i
c
e
p
s
t
o
n
e
r
e
w
h
c
i
h
w
s
t
n
u
o
m
a
d
e
t
a
c
o
l
l
a
s
e
d
u
l
c
n
I
.
l
e
v
e
l
y
t
r
e
p
o
r
p
l
e
t
o
h
l
a
u
d
i
v
i
d
n
i
e
h
t
t
a
d
e
d
r
o
c
e
r
t
o
n
s
e
s
n
e
p
x
e
s
t
n
e
s
e
r
p
e
R
)
1
(
)
2
(
l
e
t
o
h
r
u
o
f
o
h
c
a
e
r
o
f
s
i
s
a
b
y
t
r
e
p
o
r
p
-
y
b
-
y
t
r
e
p
o
r
p
a
n
o
s
r
e
d
l
o
h
t
i
n
u
P
O
d
n
a
y
n
a
p
m
o
C
e
h
t
o
t
e
l
b
a
t
u
b
i
r
t
t
a
A
D
T
I
B
E
o
t
)
s
s
o
l
(
e
m
o
c
n
i
t
e
n
s
e
l
i
c
n
o
c
e
r
e
l
b
a
t
g
n
i
w
o
l
l
o
f
e
h
T
e
t
a
d
n
o
i
t
i
s
i
u
q
c
a
s
t
i
m
o
r
f
d
e
d
u
l
c
n
i
e
r
a
e
o
h
a
T
e
k
a
L
n
o
t
l
r
a
C
-
z
t
i
R
e
h
T
f
o
s
t
l
u
s
e
r
e
h
T
.
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
r
a
e
y
e
h
t
g
n
i
r
u
d
s
i
s
a
b
e
t
a
r
o
p
r
o
c
a
n
o
d
n
a
d
e
n
w
o
s
e
i
t
r
e
p
o
r
p
:
)
d
e
t
i
d
u
a
n
u
(
)
s
d
n
a
s
u
o
h
t
n
i
(
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
h
g
u
o
r
h
t
r
a
m
e
a
r
B
&
s
l
e
t
o
H
.
c
n
I
s
t
r
o
s
e
R
6
9
1
,
1
$
)
8
4
6
,
9
6
(
)
1
(
d
e
t
a
c
o
l
l
/
e
t
a
r
o
p
r
o
C
A
$
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
E
r
a
e
Y
l
e
t
o
H
l
a
t
o
T
-
z
t
i
R
e
h
T
.
t
S
n
o
t
l
r
a
C
s
a
m
o
h
T
t
t
o
i
r
r
a
M
e
l
t
t
a
e
S
-
z
t
i
R
e
h
T
n
o
t
l
r
a
C
t
n
o
r
f
r
e
t
a
W
e
o
h
a
T
e
k
a
L
-
z
t
i
R
e
h
T
n
o
t
l
r
a
C
a
t
o
s
a
r
a
S
e
h
T
y
c
n
a
l
C
e
h
T
y
r
a
t
o
N
l
e
t
o
H
t
t
a
y
H
k
r
a
P
r
e
v
a
e
B
t
r
o
s
e
R
k
e
e
r
C
a
p
S
&
l
e
t
o
H
e
l
l
i
v
t
n
u
o
Y
r
e
i
P
e
s
u
o
H
&
t
r
o
s
e
R
a
p
S
o
n
o
s
s
e
d
r
a
B
d
n
a
l
e
t
o
H
a
p
S
l
e
t
i
f
o
S
o
g
a
c
i
h
C
t
n
e
c
i
f
i
n
g
a
M
e
l
i
M
a
L
n
o
t
l
i
H
a
l
l
o
J
y
e
r
r
o
T
s
e
n
i
P
l
a
t
i
p
a
C
n
o
t
l
i
H
4
4
8
,
0
7
$
5
9
5
,
0
3
$
4
2
1
,
0
1
$
6
0
6
$
)
4
8
4
(
$
9
3
7
,
3
$
)
3
9
4
(
$
9
0
6
,
1
$
8
6
8
$
3
0
3
,
8
$
)
6
3
(
$
)
4
2
(
$
7
1
8
,
9
$
0
2
2
,
6
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
—
—
4
6
1
,
0
5
3
4
3
,
4
2
1
1
,
0
7
4
6
7
,
1
7
8
2
4
0
3
,
0
3
1
5
2
,
3
)
9
8
1
(
8
7
4
,
1
)
7
8
2
(
)
2
(
0
6
8
,
9
1
2
9
0
,
1
1
0
3
,
0
7
6
8
2
7
8
0
,
3
4
5
1
6
7
4
,
2
7
7
8
8
8
,
4
2
)
8
8
8
,
4
2
(
)
3
5
9
,
5
2
(
—
)
8
4
(
—
—
—
6
7
9
,
3
—
—
4
9
2
,
2
9
2
1
6
2
4
,
4
—
)
3
2
(
)
9
6
(
8
1
3
7
4
8
,
5
5
1
7
,
7
—
—
)
9
9
9
,
4
(
9
9
9
,
4
5
6
9
8
9
1
0
2
7
2
2
3
—
0
7
1
—
)
6
1
(
—
—
)
0
2
(
—
—
6
8
1
,
1
5
5
3
,
0
1
9
6
3
,
8
)
2
4
(
—
—
7
2
4
,
3
8
3
1
5
9
4
,
4
—
0
5
8
3
7
4
)
9
(
—
9
8
4
,
2
6
4
1
6
7
5
,
2
—
2
3
1
)
9
8
(
—
4
6
7
9
6
—
8
3
5
1
6
,
2
—
—
2
5
9
,
1
8
3
1
8
0
1
,
3
—
—
—
—
—
—
9
5
6
,
6
—
)
5
7
(
—
—
1
5
2
6
1
6
,
5
8
4
4
4
3
5
6
8
—
)
7
5
(
—
—
.
.
.
.
.
)
2
(
s
t
n
e
m
t
s
u
j
d
a
y
t
r
e
p
o
r
p
-
n
o
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
s
e
r
e
t
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
s
n
e
p
x
e
t
s
e
r
e
t
n
I
.
.
.
.
.
.
.
.
s
t
s
o
c
n
a
o
l
f
o
n
o
i
t
a
z
i
t
r
o
m
A
5
1
9
,
7
.
.
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
i
c
e
r
p
e
D
—
3
6
.
.
.
.
)
t
i
f
e
n
e
b
(
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
e
m
o
c
n
i
(
e
s
n
e
p
x
e
p
i
h
s
r
e
n
w
o
A
D
T
I
B
E
l
e
t
o
h
-
n
o
N
g
n
i
d
u
l
c
n
i
A
D
T
I
B
E
l
e
t
o
H
o
t
e
l
b
a
t
u
b
i
r
t
t
a
s
t
n
u
o
m
a
9
7
5
,
7
2
1
)
8
2
6
,
4
1
(
7
0
2
,
2
4
1
9
9
3
,
1
1
0
5
2
,
4
1
5
7
1
,
8
6
2
6
,
3
1
8
4
2
,
4
1
0
5
8
,
9
2
4
1
,
0
1
2
0
2
,
6
0
0
7
,
1
1
0
1
6
,
5
9
6
1
,
7
5
9
6
,
5
1
1
4
1
,
4
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
3
8
5
,
7
2
1
$
)
5
6
1
,
7
(
$
8
4
7
,
4
3
1
$
9
9
3
,
1
1
$
0
5
2
,
4
1
$
5
7
1
,
8
$
6
2
6
,
3
1
$
8
4
2
,
4
1
$
0
5
8
,
9
$
2
4
1
,
0
1
$
2
0
2
,
6
$
0
0
7
,
1
1
$
0
1
6
,
5
$
9
6
1
,
7
$
1
7
7
,
1
1
$
6
0
6
,
0
1
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
r
e
d
l
o
h
t
i
n
u
.
s
e
s
n
e
p
x
e
l
a
g
e
l
d
n
a
e
c
n
a
r
u
s
n
i
,
s
e
x
a
t
e
t
a
r
o
p
r
o
c
,
y
t
r
e
p
o
r
p
l
e
t
o
h
f
o
e
l
a
s
n
o
n
i
a
g
s
a
h
c
u
s
,
s
e
i
t
r
e
p
o
r
p
l
e
t
o
h
o
t
c
i
f
i
c
e
p
s
t
o
n
e
r
e
w
h
c
i
h
w
s
t
n
u
o
m
a
d
e
t
a
c
o
l
l
a
s
e
d
u
l
c
n
I
.
l
e
v
e
l
y
t
r
e
p
o
r
p
l
e
t
o
h
l
a
u
d
i
v
i
d
n
i
e
h
t
t
a
d
e
d
r
o
c
e
r
t
o
n
s
e
s
n
e
p
x
e
s
t
n
e
s
e
r
p
e
R
)
1
(
)
2
(
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
—
9
9
1
)
5
9
1
(
)
5
9
1
(
9
9
1
—
—
9
5
4
,
7
)
9
5
4
,
7
(
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
4
2
9
,
3
(
)
5
3
5
,
3
(
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
s
t
n
e
m
t
s
u
j
d
a
A
D
T
I
B
E
:
s
s
e
L
d
e
t
a
d
i
l
o
s
n
o
c
o
t
e
l
b
a
t
u
b
i
r
t
t
a
—
—
—
—
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
i
t
i
t
n
e
d
e
t
a
d
i
l
o
s
n
o
c
n
u
f
o
)
s
s
o
l
(
s
g
n
i
n
r
a
e
n
i
y
t
i
u
q
E
A
D
T
I
B
E
f
o
n
o
i
t
r
o
p
s
’
y
n
a
p
m
o
C
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
y
e
K
n
e
p
O
f
o
o
t
e
l
b
a
t
u
b
i
r
t
t
a
A
D
T
I
B
E
l
e
t
o
H
P
O
d
n
a
y
n
a
p
m
o
C
e
h
t
105
FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to common stockholders,
computed in accordance with GAAP, excluding gains or losses on insurance settlement and disposition of assets, plus
impairment charges on real estate, depreciation and amortization of real estate assets, and after redeemable noncontrolling
interests in the operating partnership and adjustments for unconsolidated entities. NAREIT developed FFO as a relative
measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on
the basis determined by GAAP. Our calculation of Adjusted FFO excludes dividends on Series B Convertible Preferred Stock,
gain/loss on extinguishment of preferred stock, transaction and conversion costs, write-off of loan costs and exit fees, legal,
advisory and settlement costs, advisory services incentive fee, other income/expense and non-cash items such as interest
expense on Convertible Senior Notes, interest expense accretion on refundable membership club deposits, amortization of loan
costs, unrealized gain/loss on derivatives, stock/unit-based compensation 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
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 consolidated financial statements.
106
The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited):
Year Ended December 31,
2021
2020
2019
Net income (loss) ................................................................................................................................................... $
(Income) loss attributable to noncontrolling interest in consolidated entities .................................................
Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership ....................
Preferred dividends ..........................................................................................................................................
Gain (loss) on extinguishment of preferred stock ............................................................................................
2,650
3,597
(8,745)
(4,595)
(32,911) $
(124,677) $
Net income (loss) attributable to common stockholders .......................................................................................
(40,004)
(115,481)
(10,219)
(10,142)
Depreciation and amortization on real estate (1)
Net income (loss) attributable to redeemable noncontrolling interests in operating partnership ....................
...............................................................................................
Equity in (earnings) loss of unconsolidated entity ...........................................................................................
(Gain) loss on insurance settlement and disposition of assets .........................................................................
Company’s portion of FFO of OpenKey .........................................................................................................
FFO available to common stockholders and OP unitholders ..........................................................................
Series B Convertible Preferred Stock dividends ..............................................................................................
(Gain) loss on extinguishment of preferred stock ............................................................................................
Transaction and conversion costs ....................................................................................................................
Other (income) expense ...................................................................................................................................
Interest expense on Convertible Senior Notes .................................................................................................
Interest expense accretion on refundable membership club benefits ..............................................................
Write-off of loan costs and exit fees ................................................................................................................
Amortization of loan costs (1)
Unrealized (gain) loss on investment in Ashford Inc. .....................................................................................
...........................................................................................................................
Unrealized (gain) loss on derivatives ...............................................................................................................
Non-cash stock/unit-based compensation ........................................................................................................
Legal, advisory and settlement costs ...............................................................................................................
Company’s portion of adjustments to FFO of OpenKey .................................................................................
71,072
(3,597)
252
(696)
(251)
26,776
4,747
4,595
2,637
—
3,378
772
1,963
2,121
—
(32)
10,204
(208)
7
6,436
12,979
—
70,426
(12,979)
217
1,196
(2,032)
1,207
—
(9,771)
66,933
(1,207)
199
(10,149)
(25,165)
(216)
(68,182)
6,919
—
1,370
5,126
—
818
3,920
3,332
—
(4,959)
7,892
2,023
13
(201)
30,788
6,842
—
2,076
13,947
—
864
647
4,263
(7,872)
1,103
7,943
527
28
Adjusted FFO available to common stockholders, OP unitholders, Series B Cumulative Convertible
preferred stockholders and convertible note holders on an “as converted” basis ........................................ $
56,960 $
(41,728) $
61,156
____________________
(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:
Depreciation and amortization on real estate ............................................................................................. $
Amortization of loan costs .........................................................................................................................
(2,690) $
(2,945) $
(3,179)
(87)
(77)
(80)
Year Ended December 31,
2021
2020
2019
107
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments that bear
interest at variable rates that fluctuate with market interest rates. To the extent that we acquire assets or conduct operations in an
international jurisdiction, we will also have currency exchange risk. We may enter into certain hedging arrangements in order to
manage interest rate and currency fluctuations. The analysis below presents the sensitivity of the market value of our financial
instruments to selected changes in market interest rates.
At December 31, 2021, our total indebtedness of approximately $1.2 billion included approximately $1.1 billion of
variable-rate debt. The impact on the results of operations of a 25-basis point change in the interest rate on the outstanding
balance of variable-rate debt at December 31, 2021, would be approximately $2.7 million per year. Interest rate changes have
no impact on the remaining $86.3 million of fixed-rate debt.
The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and assume no
changes in our capital structure. The information presented above includes those exposures that existed at December 31, 2021,
but it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has
limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on
exposures that arise during the period, the hedging strategies at the time, and the related interest rates.
108
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (BDO USA, LLP; Dallas, Texas; PCAOB ID #243) .........
Consolidated Balance Sheets — December 31, 2021 and 2020 ......................................................................................
Consolidated Statements of Operations — Years Ended December 31, 2021, 2020 and 2019 .......................................
Consolidated Statements of Comprehensive Income (Loss) — Years Ended December 31, 2021, 2020 and 2019 .......
Consolidated Statements of Equity — Years Ended December 31, 2021, 2020 and 2019 .............................................
Consolidated Statements of Cash Flows — Years Ended December 31, 2021, 2020 and 2019 .....................................
Notes to Consolidated Financial Statements ....................................................................................................................
110
112
113
114
115
117
119
109
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, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and
the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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 10, 2022 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.
Hotel Property Acquisition for Mr. C Beverly Hills Hotel
As described in Note 4 to the consolidated financial statements, the Company acquired a 100% interest in the Mr. C Beverly
Hills Hotel and five luxury residences adjacent to the hotel on August 5, 2021 (“the Acquisition”). The total consideration
consisted of $10.0 million of cash, 2.5 million Braemar OP common units with a fair value of approximately $13.2 million and
500,000 warrants for the purchase of Braemar common stock with a fair value of approximately $1.5 million. Management
utilized various estimates in the fair value assessment related to the Acquisition.
We identified the evaluation of the fair value of the investment in hotel properties acquired in the Acquisition as a critical audit
matter. Specifically, there was judgment applied by management when developing the fair value estimates used to allocate the
purchase consideration to the acquired land, hotel building, residences and respective improvements, which also included
110
making judgments about the valuation methodologies (e.g., market approach and cost approach) and inputs to the valuation
model. Auditing these matters involved especially challenging auditor effort due to the specialized skills and knowledge
required to evaluate the valuation methodologies and the reasonableness of the inputs used to determine the fair value of the
investment in hotel properties acquired.
The primary procedures we performed to address this critical audit matter utilized valuation professionals with specialized
knowledge and skills, who assisted in:
•
•
•
Assessing the appropriateness of the valuation methodologies utilized to allocate the purchase consideration;
Assessing the relevance of the market comparable transactions utilized by management to determine the fair value of
the acquired land, by independently reviewing similar transactions from industry sources compared to transactions
used by the Company in reaching its conclusion on the fair value of the acquired elements; and
Assessing the reasonableness of the fair value of the hotel building, residences and respective improvements by
comparing the replacement cost to observable market information.
/s/ BDO USA, LLP
We have served as the Company’s auditor since 2015.
Dallas, Texas
March 10, 2022
111
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31, 2021 December 31, 2020
ASSETS
Investments in hotel properties, gross ........................................................................................................................ $
Accumulated depreciation ..........................................................................................................................................
Investments in hotel properties, net ............................................................................................................................
Cash and cash equivalents ..........................................................................................................................................
Restricted cash ............................................................................................................................................................
Accounts receivable, net of allowance of $126 and $227, respectively .....................................................................
Inventories ..................................................................................................................................................................
Prepaid expenses .........................................................................................................................................................
Investment in unconsolidated entity ...........................................................................................................................
Derivative assets .........................................................................................................................................................
Operating lease right-of-use assets .............................................................................................................................
Other assets .................................................................................................................................................................
Intangible assets, net ...................................................................................................................................................
Due from related parties, net ......................................................................................................................................
Due from third-party hotel managers .........................................................................................................................
1,845,078 $
1,784,849
(399,481)
1,445,597
215,998
47,376
23,701
3,128
4,352
1,689
139
80,462
23,588
4,261
1,770
27,461
(360,259)
1,424,590
78,606
34,544
13,557
2,551
4,405
1,708
—
81,260
14,898
4,640
991
12,271
Total assets ............................................................................................................................................................ $
1,879,522 $
1,674,021
LIABILITIES AND EQUITY
Liabilities:
Indebtedness, net ................................................................................................................................................... $
Accounts payable and accrued expenses ..............................................................................................................
Dividends and distributions payable .....................................................................................................................
Due to Ashford Inc. ...............................................................................................................................................
Due to third-party hotel managers ........................................................................................................................
Operating lease liabilities ......................................................................................................................................
Other liabilities ......................................................................................................................................................
Derivative liabilities ..............................................................................................................................................
1,172,678 $
1,130,594
96,316
2,173
1,474
610
60,937
20,034
1,435
61,758
2,736
2,772
1,393
60,917
18,077
—
Total liabilities ...................................................................................................................................................
1,355,657
1,278,247
Commitments and contingencies (note 16)
5.50% Series B cumulative convertible preferred stock, $0.01 par value, 3,078,017 and 5,031,473 shares issued
and outstanding at December 31, 2021 and December 31, 2020 ...............................................................................
Series E redeemable preferred stock, $0.01 par value, 1,710,399 and 0 shares issued and outstanding at
December 31, 2021 and December 31, 2020 ..............................................................................................................
Series M redeemable preferred stock, $0.01 par value, 29,044 and 0 shares issued and outstanding at December
31, 2021 and December 31, 2020 ...............................................................................................................................
Redeemable noncontrolling interests in operating partnership ..................................................................................
Equity:
Preferred stock, $0.01 value, 80,000,000 shares authorized: ................................................................................
8.25% Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at December 31, 2021
and December 31, 2020 .....................................................................................................................................
Common stock, $0.01 par value, 250,000,000 shares authorized, 65,365,470 and 38,274,770 shares issued
and outstanding at December 31, 2021 and December 31, 2020, respectively ....................................................
Additional paid-in capital ......................................................................................................................................
Accumulated deficit ..............................................................................................................................................
Total stockholders’ equity of the Company .......................................................................................................
Noncontrolling interest in consolidated entities ....................................................................................................
Total equity ........................................................................................................................................................
65,426
39,339
715
36,087
16
653
707,418
(309,240)
398,847
(16,549)
382,298
106,949
—
—
27,655
16
382
541,870
(266,010)
276,258
(15,088)
261,170
Total liabilities and equity .............................................................................................................................. $
1,879,522 $
1,674,021
See Notes to Consolidated Financial Statements.
112
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
REVENUE
Rooms ........................................................................................................................................................... $
Food and beverage ........................................................................................................................................
Other .............................................................................................................................................................
Total hotel revenue ..............................................................................................................................
Other .............................................................................................................................................................
280,568 $
136,265 $
303,848
90,299
56,675
427,542
—
50,263
40,446
226,974
—
115,085
68,674
487,607
7
Total revenue .......................................................................................................................................
427,542
226,974
487,614
Year Ended December 31,
2021
2020
2019
EXPENSES
Hotel operating expenses:
Rooms ..................................................................................................................................................
Food and beverage ...............................................................................................................................
Other expenses ....................................................................................................................................
Management fees .................................................................................................................................
Total hotel operating expenses ......................................................................................................
Property taxes, insurance and other ..............................................................................................................
Depreciation and amortization .....................................................................................................................
Advisory services fee ...................................................................................................................................
(Gain) loss on legal settlements ....................................................................................................................
Transaction costs ..........................................................................................................................................
Corporate general and administrative ...........................................................................................................
Total expenses .....................................................................................................................................
Gain (loss) on insurance settlement and disposition of assets ......................................................................
OPERATING INCOME (LOSS) .............................................................................................................
Equity in earnings (loss) of unconsolidated entity .......................................................................................
Interest income .............................................................................................................................................
Other income (expense) ................................................................................................................................
Interest expense and amortization of discounts and loan costs ....................................................................
Write-off of loan costs and exit fees ............................................................................................................
Unrealized gain (loss) on investment in Ashford Inc. ..................................................................................
Unrealized gain (loss) on derivatives ...........................................................................................................
INCOME (LOSS) BEFORE INCOME TAXES .....................................................................................
Income tax (expense) benefit .......................................................................................................................
NET INCOME (LOSS) .............................................................................................................................
(Income) loss attributable to noncontrolling interest in consolidated entities ...................................................
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership ......................
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY ......................................................
Preferred dividends .............................................................................................................................................
Gain (loss) on extinguishment of preferred stock ..............................................................................................
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS .............................. $
INCOME (LOSS) PER SHARE - BASIC:
59,818
75,177
138,914
13,117
287,026
34,997
73,762
22,641
(917)
563
8,717
426,789
696
1,449
(252)
48
—
(30,901)
(1,963)
—
32
(31,587)
(1,324)
(32,911)
2,650
3,597
(26,664)
(8,745)
(4,595)
38,054
46,246
98,467
7,210
189,977
28,483
73,371
18,486
—
—
6,657
316,974
10,149
(79,851)
(217)
176
(5,126)
(45,104)
(3,920)
—
4,959
(129,083)
4,406
(124,677)
6,436
12,979
(105,262)
(10,219)
—
70,297
85,679
151,063
16,573
323,612
27,985
70,112
20,527
—
704
5,435
448,375
25,165
64,404
(199)
1,087
(13,947)
(54,507)
(647)
7,872
(1,103)
2,960
(1,764)
1,196
(2,032)
1,207
371
(10,142)
—
(40,004) $
(115,481) $
(9,771)
Net income (loss) attributable to common stockholders .................................................................................... $
Weighted average common shares outstanding – basic .....................................................................................
(0.76) $
(3.39) $
52,684
33,998
INCOME (LOSS) PER SHARE - DILUTED:
Net income (loss) attributable to common stockholders .................................................................................... $
Weighted average common shares outstanding – diluted ..................................................................................
(0.76) $
(3.39) $
52,684
33,998
(0.32)
32,289
(0.32)
32,289
See Notes to Consolidated Financial Statements.
113
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
NET INCOME (LOSS) ....................................................................................................................................... $
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Year Ended December 31,
2021
2020
2019
(32,911) $
(124,677) $
1,196
Total other comprehensive income (loss) .......................................................................................................
TOTAL COMPREHENSIVE INCOME (LOSS) ............................................................................................
Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities ............................
Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership ......
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY .................................... $
—
—
(32,911)
(124,677)
2,650
3,597
6,436
12,979
(26,664) $
(105,262) $
—
1,196
(2,032)
1,207
371
See Notes to Consolidated Financial Statements.
114
S
E
I
R
A
I
D
I
S
B
U
S
D
N
A
.
C
N
I
S
T
R
O
S
E
R
&
S
L
E
T
O
H
R
A
M
E
A
R
B
Y
T
I
U
Q
E
F
O
S
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
)
s
t
n
u
o
m
a
e
r
a
h
s
r
e
p
t
p
e
c
x
e
s
d
n
a
s
u
o
h
t
n
i
(
e
l
b
a
m
e
e
d
e
R
g
n
i
l
l
o
r
t
n
o
c
n
o
N
n
i
t
s
e
r
e
t
n
I
g
n
i
t
a
r
e
p
O
p
i
h
s
r
e
n
t
r
a
P
5
8
8
,
4
4
$
—
)
6
5
4
(
—
1
0
6
,
2
8
—
—
—
—
—
—
)
4
9
5
,
2
(
)
1
0
2
,
2
(
)
7
0
2
,
1
(
4
3
5
0
7
5
,
1
4
—
6
4
1
,
2
—
—
—
—
—
—
—
—
0
7
2
)
4
5
4
,
3
(
)
9
7
9
,
2
1
(
2
0
1
5
5
6
,
7
2
—
2
9
2
,
3
—
—
—
5
7
1
,
3
1
—
—
—
—
—
$
$
e
l
b
a
m
e
e
d
e
R
M
s
e
i
r
e
S
k
c
o
t
S
d
e
r
r
e
f
e
r
P
e
l
b
a
m
e
e
d
e
R
E
s
e
i
r
e
S
k
c
o
t
S
d
e
r
r
e
f
e
r
P
B
s
e
i
r
e
S
%
0
5
.
5
e
l
b
i
t
r
e
v
n
o
C
e
v
i
t
a
l
u
m
u
C
k
c
o
t
S
d
e
r
r
e
f
e
r
P
t
n
u
o
m
A
s
e
r
a
h
S
t
n
u
o
m
A
s
e
r
a
h
S
t
n
u
o
m
A
s
e
r
a
h
S
l
a
t
o
T
g
n
i
l
l
o
r
t
n
o
c
n
o
N
n
i
s
t
s
e
r
e
t
n
I
d
e
t
a
d
i
l
o
s
n
o
C
s
e
i
t
i
t
n
E
d
e
t
a
l
u
m
u
c
c
A
t
i
c
i
f
e
D
l
a
n
o
i
t
i
d
d
A
n
i
-
d
i
a
P
l
a
t
i
p
a
C
k
c
o
t
S
n
o
m
m
o
C
D
s
e
i
r
e
S
%
5
2
.
8
e
v
i
t
a
l
u
m
u
C
k
c
o
t
S
d
e
r
r
e
f
e
r
P
t
n
u
o
m
A
s
e
r
a
h
S
t
n
u
o
m
A
s
e
r
a
h
S
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
8
5
—
—
—
—
—
—
—
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
1
2
,
6
3
0
1
7
,
1
—
—
—
—
—
—
7
9
7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
4
—
—
—
—
—
—
—
—
)
3
0
1
(
)
9
0
5
,
3
(
)
0
2
5
(
2
4
3
,
5
—
—
—
)
3
1
(
)
2
0
3
,
1
2
(
)
2
4
8
,
6
(
)
0
0
3
,
3
(
)
4
5
6
,
2
(
1
0
2
,
2
3
0
4
,
2
)
4
3
5
(
—
—
—
—
—
—
—
—
—
—
—
)
4
5
6
,
2
(
—
—
2
3
0
,
2
—
—
—
—
—
—
)
3
0
1
(
)
9
0
5
,
3
(
)
2
0
3
,
1
2
(
)
2
4
8
,
6
(
)
0
0
3
,
3
(
—
—
1
7
3
)
4
3
5
(
—
—
)
0
2
5
(
2
4
3
,
5
)
2
(
—
—
)
3
1
(
—
—
—
—
—
—
9
9
1
,
2
—
—
—
—
2
—
—
—
—
—
—
—
2
—
—
—
—
)
5
4
(
—
0
6
2
)
7
(
—
—
—
—
—
—
5
6
1
—
—
3
2
1
,
6
0
1
$
6
6
9
,
4
5
8
0
,
2
9
3
$
)
1
9
3
,
5
(
$
)
0
1
4
,
5
1
1
(
$
5
4
5
,
2
1
5
$
5
2
3
$
2
1
5
,
2
3
0
2
9
,
6
0
1
$
8
0
0
,
5
4
5
2
,
3
6
3
$
)
3
1
0
,
6
(
$
)
9
2
6
,
0
5
1
(
$
1
5
5
,
9
1
5
$
9
2
3
$
5
8
8
,
2
3
—
—
—
—
9
2
—
—
—
—
—
—
—
—
—
—
—
—
—
3
2
—
—
—
—
—
—
—
—
—
)
5
5
1
(
6
4
7
,
5
—
—
—
2
0
2
7
2
3
,
3
1
)
9
1
9
,
6
(
)
0
0
3
,
3
(
)
9
3
6
,
2
(
—
4
5
4
,
3
—
—
—
—
—
—
—
—
—
—
—
)
9
3
6
,
2
(
)
2
0
1
(
—
)
8
9
6
,
1
1
1
(
)
6
3
4
,
6
(
—
—
—
—
—
—
2
0
2
)
9
1
9
,
6
(
)
0
0
3
,
3
(
—
—
—
)
2
0
1
(
)
2
6
2
,
5
0
1
(
)
3
(
—
—
)
5
5
1
(
6
4
7
,
5
0
8
2
,
3
1
—
—
—
—
—
—
—
1
5
4
,
3
—
—
3
—
—
7
4
—
—
—
—
—
3
—
—
)
7
4
(
—
9
7
3
)
0
1
(
—
9
2
7
,
4
—
—
—
—
—
9
3
3
—
—
9
4
9
,
6
0
1
$
1
3
0
,
5
0
7
1
,
1
6
2
$
)
8
8
0
,
5
1
(
$
)
0
1
0
,
6
6
2
(
$
0
7
8
,
1
4
5
$
2
8
3
$
5
7
2
,
8
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
8
4
3
(
1
9
8
,
6
7
1
3
,
2
0
1
—
—
—
—
3
4
1
)
7
4
7
,
4
(
)
0
0
3
,
3
(
)
3
8
6
(
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
4
1
)
7
4
7
,
4
(
)
0
0
3
,
3
(
)
3
8
6
(
—
)
8
(
—
—
—
—
—
—
)
8
4
3
(
1
9
8
,
6
4
3
1
,
2
0
1
—
—
3
8
1
—
8
—
—
—
—
—
—
)
0
5
(
—
3
4
2
,
8
1
—
4
6
7
—
)
6
2
(
—
—
—
—
6
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6
1
—
—
—
—
—
—
—
—
—
—
—
$
0
0
6
,
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
8
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
d
r
a
d
n
a
t
s
g
n
i
t
n
u
o
c
c
a
w
e
n
f
o
n
o
i
t
p
o
d
a
f
o
t
c
a
p
m
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
n
o
m
m
o
c
.
c
n
I
d
r
o
f
h
s
A
f
o
n
o
i
t
u
b
i
r
t
s
i
D
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
n
o
m
m
o
c
f
o
e
s
a
h
c
r
u
P
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
y
t
i
u
q
E
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
n
u
/
s
e
r
a
h
s
d
e
t
c
i
r
t
s
e
r
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
r
a
h
s
n
o
m
m
o
c
d
e
t
c
i
r
t
s
e
r
f
o
e
r
u
t
i
e
f
r
o
F
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
r
a
h
s
d
e
r
r
e
f
e
r
p
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
s
o
c
e
c
n
a
u
s
s
i
s
e
r
a
h
s
d
e
r
r
e
f
e
r
P
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
e
r
a
h
s
/
4
6
.
0
$
(
k
c
o
t
s
n
o
m
m
o
c
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
)
e
r
a
h
s
/
0
5
7
3
.
1
$
(
B
s
e
i
r
e
S
-
k
c
o
t
s
d
e
r
r
e
f
e
r
p
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
)
e
r
a
h
s
/
5
2
6
0
.
2
$
(
D
s
e
i
r
e
S
-
k
c
o
t
s
d
e
r
r
e
f
e
r
p
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
o
t
s
n
o
i
t
u
b
i
r
t
s
i
D
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
n
u
p
i
h
s
r
e
n
t
r
a
p
g
n
i
t
a
r
e
p
o
f
o
n
o
i
s
r
e
v
n
o
c
/
n
o
i
t
p
m
e
d
e
R
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
j
d
a
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
$
0
0
6
,
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
—
—
—
—
—
—
—
—
—
—
—
—
—
—
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
n
o
m
m
o
c
f
o
e
s
a
h
c
r
u
P
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
y
t
i
u
q
E
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
n
u
/
s
e
r
a
h
s
d
e
t
c
i
r
t
s
e
r
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
r
a
h
s
n
o
m
m
o
c
d
e
t
c
i
r
t
s
e
r
f
o
e
r
u
t
i
e
f
r
o
F
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
r
a
h
s
d
e
r
r
e
f
e
r
p
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
l
l
e
c
n
a
c
n
o
p
u
k
c
a
b
w
a
l
c
d
n
e
d
i
v
i
d
U
S
P
)
e
r
a
h
s
/
0
5
7
3
.
1
$
(
B
s
e
i
r
e
S
-
k
c
o
t
s
d
e
r
r
e
f
e
r
p
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
)
e
r
a
h
s
/
5
2
6
0
.
2
$
(
D
s
e
i
r
e
S
-
k
c
o
t
s
d
e
r
r
e
f
e
r
p
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
o
t
s
n
o
i
t
u
b
i
r
t
s
i
D
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
l
l
e
c
n
a
c
n
o
p
u
k
c
a
b
w
a
l
c
d
n
e
d
i
v
i
d
P
I
T
L
e
c
n
a
m
r
o
f
r
e
P
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
n
u
p
i
h
s
r
e
n
t
r
a
p
g
n
i
t
a
r
e
p
o
f
o
n
o
i
s
r
e
v
n
o
c
/
n
o
i
t
p
m
e
d
e
R
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
j
d
a
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
$
0
0
6
,
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
—
—
—
—
—
—
—
—
—
—
—
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
n
o
m
m
o
c
f
o
e
s
a
h
c
r
u
P
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
y
t
i
u
q
E
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
d
e
r
r
e
f
e
r
p
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
n
u
/
s
e
r
a
h
s
d
e
t
c
i
r
t
s
e
r
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
i
s
i
u
q
c
a
l
e
t
o
h
r
o
f
s
t
i
n
u
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
r
a
h
s
n
o
m
m
o
c
d
e
t
c
i
r
t
s
e
r
f
o
e
r
u
t
i
e
f
r
o
F
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
l
l
e
c
n
a
c
n
o
p
u
k
c
a
b
w
a
l
c
d
n
e
d
i
v
i
d
U
S
P
)
e
r
a
h
s
/
0
5
7
3
.
1
$
(
B
s
e
i
r
e
S
-
k
c
o
t
s
d
e
r
r
e
f
e
r
p
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
)
e
r
a
h
s
/
5
2
6
0
.
2
$
(
D
s
e
i
r
e
S
-
k
c
o
t
s
d
e
r
r
e
f
e
r
p
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
.
.
.
.
)
e
r
a
h
s
/
0
0
.
1
$
(
E
s
e
i
r
e
S
-
k
c
o
t
s
d
e
r
r
e
f
e
r
p
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
115
e
l
b
a
m
e
e
d
e
R
g
n
i
l
l
o
r
t
n
o
c
n
o
N
n
i
t
s
e
r
e
t
n
I
g
n
i
t
a
r
e
p
O
p
i
h
s
r
e
n
t
r
a
P
e
l
b
a
m
e
e
d
e
R
M
s
e
i
r
e
S
k
c
o
t
S
d
e
r
r
e
f
e
r
P
e
l
b
a
m
e
e
d
e
R
E
s
e
i
r
e
S
k
c
o
t
S
d
e
r
r
e
f
e
r
P
B
s
e
i
r
e
S
%
0
5
.
5
e
l
b
i
t
r
e
v
n
o
C
e
v
i
t
a
l
u
m
u
C
k
c
o
t
S
d
e
r
r
e
f
e
r
P
t
n
u
o
m
A
s
e
r
a
h
S
t
n
u
o
m
A
s
e
r
a
h
S
t
n
u
o
m
A
s
e
r
a
h
S
l
a
t
o
T
g
n
i
l
l
o
r
t
n
o
c
n
o
N
n
i
s
t
s
e
r
e
t
n
I
d
e
t
a
d
i
l
o
s
n
o
C
s
e
i
t
i
t
n
E
d
e
t
a
l
u
m
u
c
c
A
t
i
c
i
f
e
D
l
a
n
o
i
t
i
d
d
A
n
i
-
d
i
a
P
l
a
t
i
p
a
C
k
c
o
t
S
n
o
m
m
o
C
D
s
e
i
r
e
S
%
5
2
.
8
e
v
i
t
a
l
u
m
u
C
k
c
o
t
S
d
e
r
r
e
f
e
r
P
t
n
u
o
m
A
s
e
r
a
h
S
t
n
u
o
m
A
s
e
r
a
h
S
—
—
8
3
)
4
8
5
,
4
(
)
7
9
5
,
3
(
—
—
—
8
0
1
7
8
0
,
6
3
—
—
—
—
—
—
—
3
3
1
—
$
5
1
7
$
—
—
—
—
—
—
—
—
—
9
2
—
—
—
—
—
—
—
—
8
2
1
,
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
3
2
5
,
1
4
(
)
3
5
9
,
1
(
)
5
1
(
—
9
8
1
,
1
4
8
5
,
4
—
—
—
9
8
1
,
1
3
2
5
,
1
4
7
5
2
,
6
)
8
0
1
(
)
1
6
2
,
3
(
—
—
—
—
)
4
1
3
,
9
2
(
)
0
5
6
,
2
(
)
5
1
(
—
—
—
)
4
6
6
,
6
2
(
)
5
9
5
,
4
(
—
)
8
0
1
(
)
1
6
2
,
3
(
—
—
—
—
5
7
5
,
4
7
4
0
,
6
4
7
5
2
,
6
—
—
—
—
—
9
—
1
7
—
—
—
—
—
—
8
6
8
—
—
—
—
1
9
2
,
7
9
3
3
,
9
3
$
0
1
7
,
1
6
2
4
,
5
6
$
8
7
0
,
3
8
9
2
,
2
8
3
$
)
9
4
5
,
6
1
(
$
)
0
4
2
,
9
0
3
(
$
8
1
4
,
7
0
7
$
3
5
6
$
5
6
3
,
5
6
—
—
—
—
—
—
—
—
—
6
1
—
—
—
—
—
—
—
—
—
.
.
.
)
e
r
a
h
s
/
5
8
.
0
$
(
M
s
e
i
r
e
S
-
k
c
o
t
s
d
e
r
r
e
f
e
r
p
–
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
m
o
r
f
s
n
o
i
t
u
b
i
r
t
n
o
C
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
l
l
e
c
n
a
c
n
o
p
u
k
c
a
b
w
a
l
c
d
n
e
d
i
v
i
d
P
I
T
L
e
c
n
a
m
r
o
f
r
e
P
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
i
n
u
p
i
h
s
r
e
n
t
r
a
p
g
n
i
t
a
r
e
p
o
f
o
n
o
i
s
r
e
v
n
o
c
/
n
o
i
t
p
m
e
d
e
R
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
d
e
r
r
e
f
e
r
p
f
o
t
n
e
m
h
s
i
u
g
n
i
t
x
E
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
t
o
N
r
o
i
n
e
S
e
l
b
i
t
r
e
v
n
o
C
f
o
t
n
e
n
o
p
m
o
c
y
t
i
u
q
E
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
k
c
o
t
s
d
e
r
r
e
f
e
r
p
-
t
n
e
m
t
s
u
j
d
a
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
j
d
a
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
$
0
0
6
,
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
.
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
d
e
t
a
d
i
l
o
s
n
o
C
o
t
s
e
t
o
N
e
e
S
116
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ................................................................................................................................................... $
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Depreciation and amortization ...........................................................................................................................
Equity-based compensation ..............................................................................................................................
Bad debt expense ...............................................................................................................................................
Amortization of loan costs, discounts and capitalized default interest ..............................................................
Write-off of loan costs and exit fees ..................................................................................................................
Amortization of intangibles ...............................................................................................................................
Amortization of non-refundable membership initiation fees .............................................................................
Interest expense accretion on refundable membership club deposits ................................................................
(Gain) loss on insurance settlement and disposition of assets ...........................................................................
Realized and unrealized (gain) loss on investment in Ashford Inc. ...................................................................
Realized and unrealized (gain) loss on derivatives ............................................................................................
Net settlement of trading derivatives .................................................................................................................
Equity in (earnings) loss of unconsolidated entity .............................................................................................
Deferred income tax expense (benefit) ..............................................................................................................
Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions:
Accounts receivable and inventories ...............................................................................................................
Prepaid expenses and other assets ...................................................................................................................
Accounts payable and accrued expenses .........................................................................................................
Operating lease right-of-use assets ..................................................................................................................
Due to/from related parties, net .......................................................................................................................
Due to/from third-party hotel managers ..........................................................................................................
Due to/from Ashford Inc. .................................................................................................................................
Operating lease liabilities .................................................................................................................................
Other liabilities ................................................................................................................................................
Net cash provided by (used in) operating activities ................................................................................
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from property insurance ......................................................................................................................
Net proceeds from disposition of assets .............................................................................................................
Proceeds from sale of investment in Ashford Inc. .............................................................................................
Acquisition of hotel properties ...........................................................................................................................
Investment in unconsolidated entity ..................................................................................................................
Improvements and additions to hotel properties ................................................................................................
Net cash provided by (used in) investing activities ................................................................................
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on indebtedness ..............................................................................................................................
Repayments of indebtedness ..............................................................................................................................
Payments of loan costs and exit fees ..................................................................................................................
Payments for derivatives ....................................................................................................................................
Purchase of common stock ................................................................................................................................
Payments for dividends and distributions ..........................................................................................................
Proceeds from issuance of preferred stock ........................................................................................................
Proceeds from issuance of common stock .........................................................................................................
Contributions from noncontrolling interest in consolidated entities ..................................................................
Distributions to noncontrolling interest in consolidated entities .......................................................................
Other ...................................................................................................................................................................
Net cash provided by (used in) financing activities ................................................................................
Net change in cash, cash equivalents and restricted cash ......................................................................................
Cash, cash equivalents and restricted cash at beginning of period ........................................................................
Cash, cash equivalents and restricted cash at end of period .................................................................................. $
117
Year Ended December 31,
2021
2020
2019
(32,911) $
(124,677) $
1,196
73,762
10,183
436
(205)
1,963
512
(1,029)
772
(696)
—
(32)
—
252
(174)
(11,036)
(793)
35,976
574
(779)
(15,491)
720
(268)
2,214
63,950
—
1,816
—
(17,615)
(233)
(25,644)
(41,676)
83,231
(84,224)
(1,898)
(200)
(376)
(9,088)
36,855
102,461
1,189
—
—
127,950
150,224
113,150
73,371
7,892
727
854
3,920
834
(440)
818
70,112
7,943
444
4,343
647
651
(181)
864
(10,149)
(25,165)
—
(24)
698
217
(956)
4,057
(1,460)
(10,499)
541
(440)
4,075
(1,674)
(223)
2,251
5,552
1,381
(1,076)
199
764
(5,788)
(2,228)
13,394
518
(775)
(5,484)
(555)
(194)
(300)
(50,287)
66,262
9,037
—
—
—
(26)
(25,552)
(16,541)
109,317
(47,822)
(6,485)
(92)
(263)
11,020
10,300
597
(111,751)
(332)
(136,259)
(226,425)
329,500
(257,086)
(4,447)
(115)
(384)
(16,154)
(33,409)
474
13,259
—
(2,639)
—
49,595
(17,233)
130,383
645
—
—
(2,654)
8
32,058
(128,105)
258,488
263,374 $
113,150 $
130,383
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid ........................................................................................................................................................... $
Income taxes paid (refunded) ................................................................................................................................
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Dividends and distributions declared but not paid ................................................................................................ $
Common stock purchases accrued but not paid ....................................................................................................
Issuance of common units for hotel acquisition ....................................................................................................
Issuance of warrants in hotel acquisition ..............................................................................................................
Assumption of debt in hotel acquisition ................................................................................................................
Capital expenditures accrued but not paid ............................................................................................................
Distribution of Ashford Inc. common stock ..........................................................................................................
Non-cash loan proceeds associated with accrued interest .....................................................................................
Non-cash loan principal associated with default interest and late charges ...........................................................
Non-cash extinguishment of preferred stock .........................................................................................................
Issuance of common stock from preferred stock exchange ...................................................................................
Accrued common stock offering expense .............................................................................................................
Unsettled common stock offering proceeds ..........................................................................................................
Unsettled preferred stock offering proceeds ..........................................................................................................
Accrued preferred stock offering expenses ...........................................................................................................
Non-cash preferred stock dividends ......................................................................................................................
Year Ended December 31,
2021
2020
2019
31,635 $
27,900 $
49,645
(14)
140
(11)
2,173 $
2,736 $
—
13,175
1,528
49,815
4,564
—
—
—
41,523
46,118
76
—
—
101
39
28
—
—
—
8,993
—
2,229
9,859
—
—
—
68
—
—
—
9,143
136
—
—
—
18,572
3,965
—
—
—
—
—
—
75
33
—
SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of period ................................................................................................ $
Restricted cash at beginning of period ..................................................................................................................
Cash, cash equivalents and restricted cash at beginning of period ........................................................................ $
78,606 $
71,995 $
182,578
34,544
58,388
75,910
113,150 $
130,383 $
258,488
Cash and cash equivalents at end of period ........................................................................................................... $
Restricted cash at end of period ............................................................................................................................
Cash, cash equivalents and restricted cash at end of period .................................................................................. $
215,998 $
78,606 $
47,376
34,544
71,995
58,388
263,374 $
113,150 $
130,383
See Notes to Consolidated Financial Statements.
118
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021, 2020 and 2019
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 Smith
Travel Research. 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”). In this report, the terms “Company,” “we,” “us” or
“our” refers 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 employ hotel management companies to operate them
for us under management contracts. Remington Hotels, a subsidiary of Ashford Inc., manages four of our 14 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
services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and
mobile key technology.
The accompanying consolidated financial statements include the accounts of wholly-owned and majority-owned
subsidiaries of Braemar OP that as of December 31, 2021, own 14 hotel properties in six states, the District of Columbia and
the U.S. Virgin Islands (“USVI”). The portfolio includes 12 wholly-owned hotel properties and two hotel properties that are
owned through a partnership in which Braemar OP has a controlling interest. These hotel properties represent 3,875 total
rooms, or 3,640 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, 2021, 13 of our 14 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, 2021, 11 of the 14 hotel properties were leased by Braemar’s wholly-owned TRS, and the two hotel
properties majority-owned through a consolidated partnership were 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, Inc.
(“Marriott”), Hilton Management LLC (“Hilton”), Accor Management US Inc. (“Accor”), Hyatt Corporation (“Hyatt”), Ritz-
Carlton (Virgin Islands), Inc. and The Ritz-Carlton Hotel Company, L.L.C., each of which is an affiliate of Marriott (“Ritz-
Carlton”) and Remington Hotels, which are eligible independent contractors under the Code.
Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has
resulted in significant travel restrictions and extended shutdown of numerous businesses throughout the United States. In March
2020, the World Health Organization declared COVID-19 to be a global pandemic. Beginning in late February 2020, we
experienced a significant decline in occupancy and RevPAR associated with COVID-19 as we experienced significant
reservation cancellations as well as a significant reduction in new reservations. The prolonged presence of the virus has resulted
in health and other government authorities imposing widespread restrictions on travel and other businesses.
As of December 31, 2021, the Company maintained unrestricted cash of $216.0 million and restricted cash of $47.4
million. The vast majority of the restricted cash comprises lender and manager held reserves. As of December 31, 2021, there
119
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
was also $27.5 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by
one of its property managers which is also available to fund hotel operating costs. On March 4, 2022, our board of directors
declared a quarterly cash dividend of $0.01 per diluted share for the Company’s common stock for the first quarter of 2022.
We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully
subside, whether our hotels will be forced to shut down operations or whether one or more possible recurrences of COVID-19
case surges could result in further reductions in business and personal travel or potentially cause state and local governments to
reinstate travel restrictions. Facts and circumstances could change in the future that are outside of management’s control, such
as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to
COVID-19.
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
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 January 15, 2019, we acquired The Ritz-Carlton Lake Tahoe. The operating results of the hotel property have been
included in the results of operations as of its acquisition date; and
on August 5, 2021, we acquired the Mr. C Beverly Hills Hotel and five adjacent luxury residences. The operating
results of the hotel property have been included in the results of operations from its acquisition 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 4% 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. For hotel properties owned through our
majority-owned entities, the carrying basis attributable to the partners’ minority ownership is recorded at historical cost, net of
any impairment charges, while the carrying basis attributable to our majority ownership is recorded based on the allocated
purchase price of our ownership interests in the entities. All improvements and additions which extend the useful life of the
hotel properties are capitalized.
120
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For property and equipment acquired in a business combination, we record the sets 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.
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, 2021, we held a 7.8% 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. No such
impairment was recorded for the years ended December 31, 2021, 2020 and 2019. See note 5.
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.
121
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of January 1, 2019, we recorded operating lease liabilities as well as a corresponding operating lease ROU asset which
includes deferred rent and the reclassified intangible assets and intangible liabilities associated with above/below market-rate
leases where we are the lessee.
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 19.
Derivative Instruments—We use interest rate derivatives to hedge our risks and to capitalize on the historical correlation
between changes in LIBOR (London Interbank Offered Rate) and RevPAR. Interest rate derivatives could include swaps, caps,
floors and flooridors. We also use credit default swaps to hedge financial and capital market risk. All of our derivatives are
subject to master-netting settlement arrangements and the credit default swaps are subject to credit support annexes. For credit
default swaps, cash collateral is posted by us as well as our counterparty. We offset the fair value of the derivative and the
obligation/right to return/reclaim cash collateral.
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, credit default swaps and options on futures
contracts 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 “unrealized gain (loss) on derivatives”
and “other income (expense),” respectively, in our consolidated statements of operations.
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 15.
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 15.
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 two hotel properties at
December 31, 2021 and 2020, 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
122
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
established period of time prior to the reservation. Our advance deposit balance as of December 31, 2021 and 2020 was $31.8
million and $16.2 million, respectively, and are generally recognized as revenue within a one-year period.
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. Interest
income is recognized when earned.
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.
Advertising Costs—Advertising costs are charged to expense as incurred. For the years ended December 31, 2021, 2020
and 2019, we incurred advertising costs of $4.0 million, $2.1 million and $4.5 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. PSUs and
Performance LTIP units granted to certain executive officers vest based on time and market conditions and are measured at the
grant date fair value based on a Monte Carlo simulation valuation model.
With respect to the 2019 and 2020 award agreements, the number of PSUs and Performance LTIP units actually earned
may range from 0% to 200% of target based on achievement of a specific relative total stockholder return based on the formulas
determined by the Company’s compensation committee on the grant date. The performance criteria for the PSUs and
Performance LTIP units are based on market conditions under the relevant literatures. 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, regardless of the actual outcome of the market condition.
With respect to the 2021 award agreements, the compensation committee shifted to a new 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 commencing on January 1, 2021 and ending on December 31,
2023. The performance criteria for the 2021 performance grants 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 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.
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
123
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 18.
The entities that own 13 of our 14 hotel properties are considered partnerships for U.S. federal income tax purposes.
Partnerships are not subject to U.S. federal income taxes. The partnerships’ revenues and expenses pass through to and are
taxed on the owners. The states and cities where the partnerships operate follow the U.S. federal income tax treatment, with the
exception of the District of Columbia and the city of Philadelphia. Accordingly, we provide for income taxes in these
jurisdictions for the partnerships. The consolidated entities that operate the 14 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 and various states and cities. Tax years 2017 through 2021 remain subject to potential examination by certain
federal 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.
Recently Adopted Accounting Standards—In January 2020, the Financial Accounting Standards Board’s (“FASB”) issued
Accounting Standards Update (“ASU”) 2020-01, Investments – Equity Securities (Topic 321), Investments—Equity Method and
Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic
323, and Topic 815 (a consensus of the Emerging Issues Task Force) (“ASU 2020-01”), which clarifies the interaction between
the accounting for equity securities, equity method investments, and certain derivative instruments. The ASU, among other
things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue
the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of
applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the
equity method. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those
fiscal years and should be applied prospectively. Early adoption is permitted. We adopted the standard effective January 1,
2021 and the adoption of this standard did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Standards—In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic
848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt,
leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate
reform activities occur. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU
2021-01”) to provide guidance and relief for transitioning to alternative reference rates. ASU 2021-01 is effective immediately
for all entities. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as
changes in the market occur.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with
characteristics of liabilities and equity. This ASU: (1) simplifies the accounting for convertible debt instruments and convertible
preferred stock by removing the existing guidance in Accounting Standards Codification (“ASC”) 470-20, Debt: Debt with
Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features
in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative
accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s
124
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises
the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (“EPS”) for convertible
instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating
diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, this
ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.
Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim
reporting period. We plan to adopt ASU 2020-06 through the modified retrospective method on January 1, 2022. Upon
adoption, the Convertible Senior Notes will be recorded as a single debt instrument at amortized cost, instead of being recorded
as both a liability and equity. The Company will also cease recording non-cash interest expense associated with amortization of
the debt discount associated with the conversion features. The adoption of ASU 2020-06 will result in an adjustment to
additional paid-in capital, accumulated deficit, and the carrying value of our Convertible Senior Notes. The impact of adopting
ASU 2020-06 will be an increase to “indebtedness, net” and a decrease to stockholders’ equity of approximately $5.6 million.
We do not expect the adoption of this standard to have a material impact on our consolidated financial statements, beyond the
impact to our Convertible Senior Notes described above.
3. Revenue
The following tables present our revenue disaggregated by geographical areas (in thousands):
Year Ended December 31, 2021
Primary Geographical Market
Number of Hotels
Rooms
Food and Beverage
Other Hotel
Other
Total
California ..........................................
Colorado ...........................................
Florida ...............................................
Illinois ...............................................
Pennsylvania .....................................
Washington .......................................
Washington, D.C. .............................
USVI .................................................
6
1
2
1
1
1
1
1
$ 91,283 $
27,205 $
12,938 $
— $ 131,426
17,303
65,974
14,422
11,889
15,105
9,773
54,819
10,936
27,148
3,418
1,493
1,632
3,014
7,945
21,094
1,153
776
1,578
1,142
15,453
10,049
—
—
—
—
—
—
—
36,184
114,216
18,993
14,158
18,315
13,929
80,321
Total .................................................
14
$ 280,568 $
90,299 $
56,675 $
— $ 427,542
Year Ended December 31, 2020
Primary Geographical Market
Number of Hotels
Rooms
Food and Beverage
Other Hotel
Other
Total
California ..........................................
Colorado ...........................................
Florida ...............................................
Illinois ...............................................
Pennsylvania .....................................
Washington .......................................
Washington, D.C. .............................
USVI .................................................
5
1
2
1
1
1
1
1
$ 46,291 $
13,573 $
8,056 $
— $
67,920
12,847
33,829
5,979
7,349
5,604
7,595
16,771
6,178
17,009
1,293
1,227
797
3,519
6,667
6,529
14,446
610
424
620
1,604
8,157
—
—
—
—
—
—
—
25,554
65,284
7,882
9,000
7,021
12,718
31,595
Total .................................................
13
$ 136,265 $
50,263 $
40,446 $
— $ 226,974
125
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Primary Geographical Market
Number of Hotels
Rooms
Food and Beverage
Other Hotel
Other
Total
Year Ended December 31, 2019
California ..........................................
Colorado ...........................................
Florida ...............................................
Illinois ...............................................
Pennsylvania .....................................
Washington .......................................
Washington, D.C. .............................
USVI .................................................
Corporate entities ..............................
Total .................................................
5
1
2
1
1
1
1
1
—
13
$ 115,826 $
37,022 $
15,930 $
— $ 168,778
18,209
47,166
25,366
26,016
29,235
38,735
3,295
—
12,430
26,656
7,839
4,738
6,633
16,710
3,057
—
10,049
16,758
1,565
1,133
1,629
1,840
19,770
—
—
—
—
—
—
—
—
7
40,688
90,580
34,770
31,887
37,497
57,285
26,122
7
$ 303,848 $
115,085 $
68,674 $
7 $ 487,614
For the years ended December 31, 2020 and 2019, the Company recorded revenue from business interruption losses
associated with lost profits from Hurricane Irma of $4.0 million and $19.3 million, respectively. This revenue is included in
“other” hotel revenue in our consolidated statement of operations. There was no such revenue recorded for the year ended
December 31, 2021 as the insurance claim was fully settled in 2020.
4. Investments in Hotel Properties, net
Investments in hotel properties, net consisted of the following (in thousands):
Land ......................................................................................................................... $
Buildings and improvements ...................................................................................
Furniture, fixtures and equipment ...........................................................................
Construction in progress ..........................................................................................
Residences ...............................................................................................................
Total cost ..........................................................................................................
Accumulated depreciation .......................................................................................
Investments in hotel properties, net .................................................................. $
480,530 $
December 31, 2021 December 31, 2020
455,298
1,190,437
127,692
11,422
—
1,784,849
(360,259)
1,424,590
1,215,810
123,954
12,038
12,746
1,845,078
(399,481)
1,445,597 $
The cost of land and depreciable property, net of accumulated depreciation, for U.S. federal income tax purposes was
approximately $1.4 billion and $1.3 billion as of December 31, 2021 and 2020, respectively.
For the years ended December 31, 2021, 2020 and 2019, depreciation expense was $73.0 million, $72.8 million and $69.5
million, respectively.
Impairment Charges and Insurance Recoveries
For the years ended December 31, 2020 and 2019, the Company received proceeds of $14.5 million and $36.6 million,
respectively, from our insurance carriers for property damage and business interruption from Hurricane Irma. In September
2020, the Company reached a final settlement with its insurance carriers related to Hurricane Irma. Upon settlement, the
Company recorded a gain of $10.1 million as the proceeds received exceeded the carrying value of the hotel property at the
time of the loss. Additionally, for the year ended December 31, 2019, the Company recorded a gain of $26.2 million upon
settlement of a portion of the insurance claim. For the year ended December 31, 2021, we recognized a gain of $481,000
associated with proceeds received from an insurance claim.
During the years ended December 31, 2021, 2020 and 2019, no impairment charges were recorded.
Mr. C Beverly Hills Hotel
On August 5, 2021, the Company acquired a 100% interest in the 138-room Mr. C Beverly Hills Hotel and five luxury
residences adjacent to the hotel. The total consideration consisted of $10.0 million of cash, 2.5 million Braemar OP common
units with a fair value of approximately $13.2 million and 500,000 warrants for the purchase of Braemar common stock with a
126
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
$6.00 strike price and a fair value of approximately $1.5 million. Additionally the Company assumed a $50.0 million mortgage
loan, with a fair value of approximately $49.8 million. Upon closing, the Company repaid $20.0 million of the assumed
mortgage loan. See notes 6, 7 and 11 for further discussion regarding the mortgage loan, common units and warrants.
The acquisition of the Mr. C Beverly Hills Hotel included the hotel and the adjacent luxury residences (the “residences”).
We have accounted for the transaction as a business combination under Accounting Standards Codification (“ASC”) 805-
Business Combinations. We prepared the purchase price allocation of the assets acquired and liabilities assumed. The final
purchase price allocation was completed with the assistance of a third party appraisal firm during the year ended December 31,
2021.
This valuation is considered a Level 3 valuation technique, as noted in the following table (in thousands):
Land ................................................................................................................................................................................................... $
Buildings and improvements .............................................................................................................................................................
Furniture, fixtures and equipment ....................................................................................................................................................
Residences ...........................................................................................................................................
Investments in hotel properties .........................................................................................................................................................
Inventories .........................................................................................................................................................................................
Mortgage loan ...................................................................................................................................................................................
$
Net other assets (liabilities) ............................................................................................................................................................... $
25,232
35,689
758
12,746
74,425
94
(49,815)
24,704
(486)
The results of operations of the hotel property have been included in our results of operations from the acquisition date.
The table below summarizes the total revenue and net income (loss) in our consolidated statements of operations for the year
ended December 31, 2021:
Total revenue .................................................................................................................................................................... $
Net income (loss) ..............................................................................................................................................................
6,592
(1,630)
Pro Forma Financial Results
The following table reflects the unaudited pro forma results of operations as if the acquisitions had occurred and the
applicable indebtedness was incurred on January 1, 2020, and the removal of $563,000 of non-recurring transaction costs
directly attributable to the acquisition for the year ended December 31, 2021 (in thousands):
Year Ended
December 31, 2021
Year Ended December 31,
2021
2020
Total revenue .................................................................................................................................................................................... $
433,813 $
235,379
Net income (loss) ............................................................................................................................................................................. $
Net income (loss) attributable to common stockholders .................................................................................................................. $
(32,720) $
(38,334) $
(128,461)
(111,613)
Pro forma income (loss) per share;
Basic .............................................................................................................................................................................................. $
Diluted ........................................................................................................................................................................................... $
Weighted average common shares outstanding (in thousands):
Basic ..............................................................................................................................................................................................
Diluted ...........................................................................................................................................................................................
(0.72) $
(0.72) $
(3.28)
(3.28)
52,684
52,684
33,998
33,998
5. Investment in Unconsolidated Entity
OpenKey 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. In 2018, the Company made an initial investment in OpenKey, which is
controlled and consolidated by Ashford Inc., for an initial 8.2% ownership interest. In 2021, the Company made additional
investments of $233,000. All investments were recommended by our Related Party Transactions Committee and unanimously
approved by the independent members of our board of directors. As of December 31, 2021, the Company has made investments
in OpenKey totaling $2.6 million.
127
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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. We review our investment in OpenKey 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. No such impairment was
recorded for the years ended December 31, 2021, 2020 and 2019.
The following table summarizes our carrying value and ownership interest in OpenKey:
Carrying value of the investment in OpenKey (in thousands) ........................ $
Ownership interest in OpenKey ......................................................................
December 31, 2021
1,689
December 31, 2020
1,708
$
7.8 %
8.2 %
The following table summarizes our equity in earnings (loss) in OpenKey (in thousands):
Equity in earnings (loss) of unconsolidated entity .. $
(252) $
(217) $
(199)
Line Item
2021
2020
2019
Year Ended December 31,
6. Indebtedness, net
Indebtedness, net consisted of the following (dollars in thousands):
Indebtedness
Collateral
Mortgage loan (3)
Mortgage loan (4)
...................
...................
Park Hyatt Beaver Creek Resort & Spa
The Notary Hotel
The Clancy
Sofitel Chicago Magnificent Mile
Marriott Seattle Waterfront
Current
Maturity
April 2022
June 2022
Final
Maturity (12)
April 2022
June 2025
Interest Rate
LIBOR (1) +3.00%
LIBOR (1) + 2.16%
December 31, 2021
December 31, 2020
Debt
Balance
Book Value
of Collateral
Debt
Balance
Book Value
of Collateral
$
67,500
$
137,718
$
67,500
$
140,516
435,000
417,109
435,000
439,215
Mortgage loan (5)
Term loan (6)
...................
..........................
Mortgage loan (7)
Mortgage loan (7) (8)
Mortgage loan (7) (8)
Mortgage loan (7)
Mortgage loan (9)
...................
...............
...............
...................
...................
..................
Mortgage loan (10)
Mortgage loan (7)
...................
Convertible Senior Notes (11)
.
Capitalized default interest
and late charges .....................
Deferred loan costs, net .........
Discounts, net ........................
Indebtedness, net ...................
The Ritz-Carlton St. Thomas
August 2022
August 2024
Equity
October 2022
October 2022
The Ritz-Carlton Sarasota
Hotel Yountville
April 2023
May 2023
April 2023
May 2023
Bardessono Hotel and Spa
August 2023
August 2023
The Ritz-Carlton Lake Tahoe
January 2024
January 2024
Capital Hilton
February 2024
February 2024
Hilton La Jolla Torrey Pines
LIBOR (1) + 3.95%
Base Rate (2) + 1.25% to
2.65% or LIBOR (1) +
2.25% to 3.65%
LIBOR (1) + 2.65%
LIBOR (1) + 2.55%
LIBOR (1) + 2.55%
LIBOR (1) + 2.10%
LIBOR (1) + 1.70%
Mr. C Beverly Hills Hotel
August 2024
August 2024
Pier House Resort & Spa
September 2024
September 2024
LIBOR (1) + 3.60%
LIBOR (1) + 1.85%
Equity
June 2026
June 2026
4.50%
42,500
124,114
42,500
130,216
—
99,500
51,000
40,000
54,000
195,000
30,000
80,000
86,250
—
162,621
85,847
53,413
112,713
193,194
73,587
85,281
—
61,495
100,000
51,000
40,000
54,000
197,229
—
80,000
—
—
163,814
87,795
56,645
113,821
203,918
—
88,650
—
1,180,750
1,445,597
1,128,724
1,424,590
3,904
(3,538)
(8,438)
7,304
(5,434)
—
$ 1,172,678
$ 1,445,597
$ 1,130,594
$ 1,424,590
__________________
(1)
LIBOR rates were 0.101% and 0.144% at December 31, 2021 and December 31, 2020, respectively.
(2)
(3)
(4)
(5)
(6)
Base Rate, as defined in the secured term loan agreement, is the greater of (i) the prime rate set by Bank of America, or (ii) federal funds rate + 0.5%, or
(iii) LIBOR + 1.0%.
Effective January 9, 2021, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits being waived from January
2021 through June 2021. This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the third was
exercised in April 2021.
This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in June 2021.
This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in August 2021.
This mortgage loan has a LIBOR floor of 1.00%.
Effective February 22, 2021, we amended this term loan. In conjunction with the amendment, the interest rate spread increased from a rate of Base Rate +
1.25% - 2.50% or LIBOR + 2.25% - 3.50% to a Base Rate + 1.25% - 2.65% or LIBOR + 2.25% - 3.65%, with a LIBOR floor of 0.50%. On May 18,
2021, we repaid this term loan in full.
128
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(7)
(8)
(9)
Effective December 31, 2020, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits being waived from
January 2021 through December 2021. This mortgage loan has a LIBOR floor of 0.25%.
On September 23, 2021, we amended this mortgage loan. Terms of the agreement included extending the current and final maturity dates by one year.
Effective March 5, 2021, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits waived through July 1, 2021.
(10) This mortgage loan has a LIBOR floor of 1.50%.
(11) On May 18, 2021, we executed a purchase agreement to sell convertible senior notes in a private offering. In conjunction with the private offering, we
sold convertible senior notes with an aggregate principal amount of $86.25 million.
(12) The final maturity date assumes all available extensions options will be exercised.
During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to
loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville,
Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront,
Capital Hilton and Hilton La Jolla Torrey Pines. As of December 31, 2021, no loans are in default. See note 15 for discussion of
the loan modification agreement with Lismore Capital LLC (“Lismore”). The Company determined that all of the forbearance
and other agreements evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and
the forgiveness of default interest and late charges. No gain or loss was recognized during 2020, as the carrying amount of the
original loans was not greater than the undiscounted cash flows of the modified loans.
As a result of the troubled debt restructurings, all accrued default interest and late charges were capitalized into the
applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method. The
amount of default interest and late charges capitalized into indebtedness for the year ended December 31, 2020 was $9.9
million. The amount of principal amortization for the years ended December 31, 2021 and 2020 was $3.4 million and $2.6
million, respectively.
On August 5, 2021, in connection with the acquisition of the Mr. C Beverly Hills Hotel and the adjacent residences, the
Company assumed a $50 million mortgage loan and repaid $20 million upon closing. This mortgage loan provides for an
interest rate of LIBOR + 3.60%. The mortgage loan is interest only with a stated maturity in August 2024.
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. A portion of the proceeds were
used to fully repay the secured term loan.
The Convertible Senior Notes are governed by an indenture (the “Base 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. The Company recorded coupon interest expense of $2.4 million for the year ended December 31, 2021.
The Company separated the Convertible Senior Notes into liability and equity components. The initial carrying amount of
the liability component was calculated using a discount rate of 7.1%. The discount rate was based on the terms of debt
instruments that were similar to the Convertible Senior Notes. The $6.3 million carrying amount of the equity component
representing the conversion option was determined by deducting the fair value of the liability component from the net proceeds
of the Convertible Senior Notes. The amount recorded in equity is not subject to remeasurement or amortization. The initial
discount of $9.3 million is accreted to interest expense using the effective interest rate method over the contractual term of the
Convertible Senior Notes. The Company recorded discount amortization of $974,000 for the year ended December 31, 2021,
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. 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.
129
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
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, 2021, we were in compliance with all covenants.
Maturities and scheduled amortization of indebtedness as of December 31, 2021, assuming no extension of existing
extension options for each of the following five years and thereafter are as follows (in thousands):
2022 ........................................................................................................................................................................... $
2023 ...........................................................................................................................................................................
2024 ...........................................................................................................................................................................
2025 ...........................................................................................................................................................................
2026 ...........................................................................................................................................................................
Thereafter ..................................................................................................................................................................
546,000
189,500
359,000
—
86,250
—
Total ................................................................................................................................................................... $ 1,180,750
7. 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. The
interest rate derivatives include interest rate caps and interest rate floors, which are subject to master netting settlement
arrangements. All derivatives are recorded at fair value.
The following table summarizes the interest rate derivatives we entered into over the applicable periods:
Interest rate caps:(1)
Notional amount (in thousands) ........................... $
Strike rate low end of range .................................
Strike rate high end of range ................................
Year Ended December 31,
2021
2020
2019
882,500
$
602,500
$
0.75 %
4.00 %
3.00 %
4.00 %
391,000
3.00 %
7.80 %
Effective date range .............................................
January 2021- September 2021
March 2020 - June 2020
January 2019 - December 2019
Termination date range ........................................
February 2022- August 2024
April 2021 - June 2021
March 2020 -October 2021
Total cost of interest rate caps (in thousands) ...... $
200
$
92
$
115
Interest rate floors:
Notional amount (in thousands) ........................... $
—
$
—
$
2,000,000
Strike rate low end of range .................................
Strike rate high end of range ................................
Effective date .......................................................
Termination date .................................................
Total cost of interest rate floors (in thousands) ... $
—
$
—
$
_______________
(1) No instruments were designated as cash flow hedges.
1.63 %
1.63 %
January 2019
March 2020
75
130
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Interest rate derivatives consisted of the following:
Interest rate caps: (1)
December 31, 2021
December 31, 2020
Notional amount (in thousands) .................................................................................... $
882,500
$
Strike rate low end of range ..........................................................................................
Strike rate high end of range .........................................................................................
0.75 %
4.00 %
779,000
3.00 %
4.00 %
Termination date range .................................................................................................
February 2022 - August 2024
February 2021 - October 2021
Aggregate principal balance on corresponding mortgage loans (in thousands) ........... $
857,000
$
779,000
_______________
(1) No instruments were designated as cash flow hedges.
Warrants—On August 5, 2021, as part of the consideration paid to acquire 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 holder can choose to exercise the warrant by cash or by net issue exercise,
in which event the Company shall issue to the holder a number of warrant shares which reflects the fair market value of the
Company’s common stock. As of December 31, 2021, no warrants have been exercised.
The initial fair value of the warrant was calculated using a Black-Scholes option pricing model with the following
assumptions: three-year contractual term; 97.93% volatility; 0% dividend rate; and a risk-free interest rate of 0.38%. The
estimated fair value of the warrants was approximately $1.5 million on the date of issuance. The warrants are re-valued at each
reporting period with the change in fair value recorded through earnings.
In applying the guidance in ASC 815, it was determined that the warrants should be classified as a liability as a result of
certain settlement provisions. The warrants are included in derivative liabilities on the consolidated balance sheet and changes
in value are reported as a component of unrealized gain (loss) on derivatives on the consolidated statements of operations. This
is a Level 2 valuation technique.
8. 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 market
place 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.
Fair value of interest rate caps is determined using the net present value of expected cash flows of each derivative based on
the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair value of credit default
swaps is obtained from a third-party who publishes various information including the index composition and price data (Level 2
inputs). The fair value of credit default swaps does not contain credit-risk-related adjustments as the change in fair value is
settled net through posting cash collateral or reclaiming cash collateral between us and our counterparty. Fair value of interest
rate floors is calculated using a third-party discounted cash flow model based on future cash flows that are expected to be
received over the remaining life of the floor. The fair value of warrants is determined by using the Black-Scholes option pricing
model.
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, 2021, the
LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 0.101% to 1.500% for the remaining term of our
131
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
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, 2021
Assets
Derivative assets:
Interest rate derivatives - caps ........................................ $
Total ................................................................................ $
Liabilities
Derivative liabilities: ...........................................................
Warrants ..........................................................................
Net .......................................................................................... $
__________________
(1)
Reported as “derivative assets” in our consolidated balance sheet.
(2)
Reported as “derivative liabilities” in our consolidated balance sheet.
— $
— $
—
— $
139 $
139 $
— $
— $
139
139 (1)
(1,435) $
(1,296) $
(1,435) (2)
—
— $ (1,296)
132
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,
2021
2020
2019
Assets
Derivative assets:
Interest rate derivatives - floors .................................................. $
Interest rate derivatives - caps ..................................................... $
Credit default swaps ....................................................................
Total derivative assets ......................................................... $
Non-derivative assets:
Investment in Ashford Inc. ...................................................... $
Total .................................................................................... $
Liabilities
Derivative liabilities:
Warrants ......................................................................................
Net .......................................................................................... $
Total combined
Interest rate derivatives - floors ....................................................... $
Interest rate derivatives - caps ..........................................................
Credit default swaps .........................................................................
Warrants ...........................................................................................
Unrealized gain (loss) on derivatives ..........................................
Realized gain (loss) on credit default swaps ....................................
Realized gain (loss) on interest rate floors .......................................
Unrealized gain (loss) on investment in Ashford Inc. .....................
Realized gain (loss) on investment in Ashford Inc. .........................
Net .......................................................................................... $
—
(62)
—
(62)
—
(62)
94
32
—
(62)
—
94
32
—
—
—
—
32
$
$
$
$
$
$
$
$
—
(93)
117 (1)
24
—
24
—
24
3,615
(93)
1,437
—
4,959
(1,320)
(3,615) (2)
—
—
24
$
$
$
$
$
$
$
$
(152)
(134)
(1,095) (1)
(1,381)
(5,552)
(6,933)
—
(6,933)
126
(134)
(1,095)
—
(1,103)
—
(278) (2)
7,872
(13,424)
(6,933)
_______________
(1)
Excludes costs associated with credit default swaps of $191 and $253 for the years ended December 31, 2020 and 2019, respectively, which is included in
“other income (expense)” in our consolidated statements of operations.
(2)
Included in “other income (expense)” in our consolidated statements of operations.
9. 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.
133
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):
Financial assets and liabilities measured at fair value:
Derivative assets ..................................................................... $
Derivative liabilities ...............................................................
139 $
1,435
139 $
1,435
— $
—
December 31, 2021
December 31, 2020
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Financial assets not measured at fair value:
Cash and cash equivalents ...................................................... $
Restricted cash ........................................................................
Accounts receivable, net ........................................................
Due from related parties, net ..................................................
Due from third-party hotel managers .....................................
Financial liabilities not measured at fair value:
Indebtedness ........................................................................... $
Accounts payable and accrued expenses ................................
Dividends and distributions payable ......................................
Due to Ashford Inc. ................................................................
Due to third-party hotel managers ..........................................
215,998 $
215,998 $
78,606 $
47,376
23,701
1,770
27,461
47,376
23,701
1,770
27,461
34,544
13,557
991
12,271
1,172,312
$1,022,408 to $1,130,029
$
1,128,724
$884,325 to $977,411
96,316
2,173
1,474
610
96,316
2,173
1,474
610
61,758
2,736
2,772
1,393
61,758
2,736
2,772
1,393
—
—
78,606
34,544
13,557
991
12,271
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 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.
Derivative assets and derivative liabilities. See notes 7 and 8 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 87.2% to 96.4% of the carrying value of $1.2 billion at December 31,
2021, and approximately 78.3% to 86.6% of the carrying value of $1.1 billion at December 31, 2020. These fair value estimates
are considered a Level 2 valuation technique.
134
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. 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):
Net income (loss) attributable to common stockholders - basic and diluted:
Net income (loss) attributable to the Company ..................................................................................................... $
Less: Dividends on preferred stock .......................................................................................................................
Less: Dividends on common stock ........................................................................................................................
Less: Loss on extinguishment of preferred stock - Series B .................................................................................
Less: Dividends on unvested performance stock units .........................................................................................
Add: Claw back of dividends on cancelled performance stock units ....................................................................
Less: Dividends on unvested restricted shares ......................................................................................................
—
(4,595)
—
143
—
—
—
—
202
—
Undistributed net income (loss) allocated to common stockholders ..................................................................
(39,861)
(115,279)
Add back: Dividends on common stock ................................................................................................................
—
—
(10,142)
(24,145)
—
(261)
—
(405)
(34,582)
24,145
Year Ended December 31,
2021
2020
2019
(26,664) $
(105,262) $
371
(8,745)
(10,219)
Distributed and undistributed net income (loss) - basic and diluted ........................................................... $
(39,861) $
(115,279) $
(10,437)
Weighted average common shares outstanding:
Weighted average common shares outstanding – basic and diluted .....................................................................
52,684
33,998
32,289
Income (loss) per share - basic:
Net income (loss) allocated to common stockholders per share ......................................................................... $
(0.76) $
(3.39) $
(0.32)
Income (loss) per share - diluted:
Net income (loss) allocated to common stockholders per share ......................................................................... $
(0.76) $
(3.39) $
(0.32)
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):
Net income (loss) allocated to common stockholders is not adjusted for:
Income (loss) allocated to unvested restricted shares ........................................................................................ $
Income (loss) allocated to unvested performance stock units ............................................................................
Income (loss) attributable to redeemable noncontrolling interests in operating partnership ............................. $
Dividends on preferred stock - Series B ............................................................................................................
Loss on extinguishment of preferred stock - Series B .......................................................................................
Interest expense on Convertible Senior Notes ...................................................................................................
Dividends on preferred stock - Series E .............................................................................................................
Dividends on preferred stock - Series M ...........................................................................................................
Total .............................................................................................................................................................. $
Weighted average diluted shares are not adjusted for:
Effect of unvested restricted shares ...................................................................................................................
Effect of unvested performance stock units .......................................................................................................
Effect of assumed conversion of operating partnership units ............................................................................
Effect of assumed conversion of preferred stock - Series B ..............................................................................
Effect of assumed conversion of exchanged preferred stock - Series B ............................................................
Effect of assumed conversion of Convertible Senior Notes ..............................................................................
Effect of assumed conversion of preferred stock - Series E ..............................................................................
Effect of assumed conversion of preferred stock - Series M .............................................................................
Year Ended December 31,
2021
2020
2019
— $
—
— $
—
405
261
(3,597) $
(12,979) $
(1,207)
6,919
6,842
4,747
4,595
3,378
683
—
—
—
15
9,821 $
—
(6,060) $
99
—
4,980
4,614
364
8,450
1,345
32
22
—
3,923
6,728
—
—
—
—
—
—
—
—
6,301
51
193
4,219
6,581
—
—
—
—
Total ..............................................................................................................................................................
19,884
10,673
11,044
135
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Redeemable Noncontrolling Interests in Operating Partnership
Redeemable noncontrolling interests in the operating partnership represents 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
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.
With respect to the 2019 and 2020 award agreements, the number of Performance LTIP units actually earned may range
from 0% to 200% of target based on achievement of a specified relative total stockholder return based on the formula
determined by the Company’s compensation committee on the grant date. The performance criteria for the Performance LTIP
units are based on market 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, regardless of the
actual outcome of the market condition.
During the years ended December 31, 2021 and 2020, approximately 60,000 performance-based LTIP units granted in
2019, and 211,000 performance-based LTIP units granted in 2018, 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 $38,000 and $270,000,
respectively.
With respect to the 2021 award agreements, the compensation committee shifted to a new 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 commencing on January 1, 2021 and ending on December 31,
2023. The performance criteria for the 2021 performance grants 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 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.
As of December 31, 2021, we have issued a total of approximately 2.4 million LTIP and Performance LTIP units, net of
Performance LTIP cancellations. All LTIP and Performance LTIP units, other than approximately 569,000 LTIP units and
840,000 Performance LTIP units issued from March 2015 to May 2021, had reached full economic parity with, and are
convertible into, common units.
136
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):
Type
Line Item
Year Ended December 31,
2020
2021
2019
Performance LTIP units .............................. Advisory services fee
$
1,765 $
884 $
1,144
LTIP units ................................................... Advisory services fee
LTIP units ................................................... Corporate, general and administrative
LTIP units - independent directors ............. Corporate, general and administrative
Total ............................................................
1,372
12
164
1,142
1,354
—
120
—
103
$
3,313 $
2,146 $
2,601
The unamortized cost of the unvested Performance LTIP units of approximately $4.6 million at December 31, 2021 will be
expensed over a period of 2.0 years with a weighted average period of 1.7 years. The unamortized cost of the unvested LTIP
units of approximately $2.5 million at December 31, 2021, will be amortized over a period of 2.2 years with a weighted average
period of 2.0 years.
On August 5, 2021, we issued 2.5 million common units in our operating partnership in conjunction with the acquisition of
the Mr. C Beverly Hills Hotel. See note 4.
A summary of the activity of the units in our operating partnership is as follows (in thousands):
Year Ended December 31,
2020
2019
2021
Units outstanding at beginning of year ...............................................................................
LTIP units issued ................................................................................................................
Performance LTIP units issued ...........................................................................................
Common units issued for hotel acquisition .........................................................................
Units redeemed for shares of common stock ......................................................................
Performance LTIP units cancelled ......................................................................................
Units outstanding at end of year .........................................................................................
Units convertible/redeemable at end of year .......................................................................
4,277
469
840
2,500
(868)
(60)
7,158
5,533
4,538
129
160
—
(339)
(211)
4,277
3,823
4,833
91
60
—
(165)
(281)
4,538
4,027
The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding
approximate ownership percentage of our operating partnership:
Redeemable noncontrolling interests in Braemar OP ............................................................................................... $
Adjustments to redeemable noncontrolling interests (1)
............................................................................................ $
Ownership percentage of operating partnership .......................................................................................................
December 31, 2021
36,087
December 31, 2020
$
27,655
$
275
8.83 %
167
9.43 %
____________________________________
(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,
2020
2021
2019
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership ................ $
Distributions declared to holders of common units, LTIP units and Performance LTIP units ...................
Performance LTIP dividend claw back upon cancellation ..........................................................................
3,597 $
—
(38)
12,979 $
—
(270)
1,207
3,050
—
137
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table presents the common units redeemed and the fair value at redemption (in thousands):
Common units converted to common stock ................................................................................................
868
Fair value of common units converted ........................................................................................................ $
4,122
(2) $
339
390
(1) $
165
2,201
____________________________________
(1) The redemption value is the greater of historical cost or fair value. The historical cost of the converted units was $3.5 million.
(2) The redemption value is the greater of historical cost or fair value. The historical cost of the converted units was $4.6 million.
Year Ended December 31,
2021
2020
2019
12. Equity
Common Stock Dividends—The following table summarizes the common stock dividends declared during the period (in
thousands):
Year Ended December 31,
2021
2020
2019
Common stock dividends declared ............................................................................................ $
— $
— $
21,302
8.25% Series D Cumulative Preferred Stock—At December 31, 2021 and 2020, 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
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,
2021
2020
2019
Series D Cumulative Preferred Stock .................................................................................................................... $
3,300 $
3,300 $
3,300
Stock Repurchases—On October 27, 2014, our board of directors approved a share repurchase program under which the
Company may purchase up to $100 million of the Company’s common stock from time to time. The repurchase program does
not have an expiration date. The specific timing, manner, price, amount and other terms of the repurchases is at management’s
discretion and depends on market conditions, corporate and regulatory requirements and other factors. The Company is not
required to repurchase shares under the repurchase program, and may modify, suspend or terminate the repurchase program at
any time for any reason.
On December 5, 2017, our board of directors reapproved the stock 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 board of directors’ authorization replaced any previous repurchase
authorizations. No shares were repurchased during the years ended December 31, 2021, 2020 and 2019. As of December 31,
2021, $50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.
138
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We repurchased approximately 50,000, 47,000 and 45,000 shares of our common stock in 2021, 2020 and 2019,
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.
At-the-Market Common Stock Equity Distribution Program—On December 11, 2017, the Company established an “at-
the-market” equity distribution program pursuant to which it may, from time to time, sell shares of its common stock having an
aggregate offering price of up to $50 million.
As of December 31, 2021, the Company has sold approximately 7.4 million shares of common stock and received net
proceeds of approximately $30.5 million under this program.
The issuance activity is summarized below (in thousands):
Common shares issued ..........................................................................................................................................
Gross proceeds received ........................................................................................................................................ $
Commissions .........................................................................................................................................................
Year Ended December 31,
2021
2020
2019
2,711
4,729
16,119 $
14,717 $
202
184
Net proceeds .......................................................................................................................................................... $
15,917 $
14,533 $
—
—
—
—
Standby Equity Distribution Agreement—On February 4, 2021, the Company entered into a Standby Equity Distribution
Agreement (the “SEDA”) with YA II PN, Ltd. (“YA”), pursuant to which the Company will be able to sell up to 7,780,786
shares of its common stock (the “Commitment Amount”) at the Company’s request any time during the commitment period
commencing on February 4, 2021, and terminating on the earliest of (i) the first day of the month next following the 36-month
anniversary of the SEDA or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA)
pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment
Period”). Other than with respect to the Initial Advance (as defined below) the shares sold to YA pursuant to the SEDA would
be purchased at 95% of the Market Price (as defined below) and would be subject to certain limitations, including that YA
could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock. “Market Price”
shall mean the lowest daily VWAP (as defined below) of the Company’s common stock during the five consecutive trading
days commencing on the trading day following the date the Company submits an advance notice to YA. “VWAP” means, for
any trading day, the daily volume weighted average price of the Company’s common stock for such date on the principal
market as reported by Bloomberg L.P. during regular trading hours.
At any time during the Commitment Period the Company may require YA to purchase shares of the Company’s common
stock by delivering a written notice to YA setting forth the Advance Shares (as defined in the SEDA) that the Company desires
to issue and sell to YA (the “Advance Notice”). The Company may deliver an Advance Notice for an initial Advance for up to
1,200,000 Advance Shares (the “Initial Advance”). The preliminary purchase price per share for such shares shall be 100% of
the average daily VWAP for the five consecutive trading days immediately prior to the date of the Advance Notice.
Pursuant to the SEDA, we currently intend to use the net proceeds from any sale of the shares for working capital purposes,
including the repayment of outstanding debt. There are no other restrictions on future financing transactions. The SEDA does
not contain any right of first refusal, participation rights, penalties or liquidated damages. We are not required to pay any
additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $10,000
structuring fee.
The issuance activity under the SEDA is summarized below (in thousands):
Common shares sold to YA ........................................................................................................................................................
Proceeds received ....................................................................................................................................................................... $
1,700
10,000
Year Ended December 31, 2021
Common Stock Resale Agreement—On April 21, 2021, the Company entered into a purchase agreement (the “Lincoln
Park Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company may issue
or sell to Lincoln Park up to 8,893,565 shares of the Company’s common stock from time to time during the term of the
Lincoln Park Purchase Agreement. The issuance of the shares of common stock pursuant to the Lincoln Park Purchase
Agreement has been registered pursuant to the Company’s shelf registration statement on Form S-3 (the “Registration
Statement”), and the related base prospectus included in the Registration Statement, as supplemented by a prospectus
139
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
supplement filed with the SEC on April 21, 2021. The Company and Lincoln Park also entered into a registration rights
agreement, pursuant to which the Company agreed to maintain the effectiveness of the Registration Statement. Upon entering
into the Lincoln Park Purchase Agreement, the Company issued 15,000 shares of the Company’s common stock as
consideration for Lincoln Park’s execution and delivery of the Lincoln Park Purchase Agreement.
The issuance activity under the Lincoln Park agreement is summarized below (in thousands):
Common shares sold to Lincoln Park ........................................................................................................................................
Additional commitment shares ..................................................................................................................................................
Total common shares issued to Lincoln Park ............................................................................................................................
Proceeds received ...................................................................................................................................................................... $
766
15
781
4,217
Year Ended December 31, 2021
At-the-Market Equity Distribution Agreement—On May 25, 2021, the Company entered into an equity distribution
agreement (the “Virtu May 2021 EDA”) with Virtu Americas LLC (“Virtu”), to sell from time to time shares of the Company’s
common stock having an aggregate offering price of up to $50 million. We will pay Virtu a commission of approximately 1.0%
of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our
common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.
The issuance activity under the Virtu May 2021 EDA is summarized below (in thousands):
Common shares issued ................................................................................................................................................................
Gross proceeds received .............................................................................................................................................................. $
Commissions ...............................................................................................................................................................................
Net proceeds ................................................................................................................................................................................ $
8,339
50,000
500
49,500
Year Ended December 31, 2021
On July 12, 2021, the Company entered into a second equity distribution agreement (the “Virtu July 2021 EDA”) with
Virtu to sell from time to time shares of our common stock having an aggregate offering price of up to $100 million. We will
pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company
may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at
the time of sale.
The issuance activity under the Virtu July 2021 EDA is summarized below (in thousands):
Common shares issued ................................................................................................................................................................
Gross proceeds received .............................................................................................................................................................. $
Commissions ...............................................................................................................................................................................
Net proceeds ................................................................................................................................................................................ $
4,712
24,020
240
23,780
Year Ended December 31, 2021
Noncontrolling Interest in Consolidated Entities—A partner had noncontrolling ownership interests of 25% in two hotel
properties with a total carrying value of $(16.5) million and $(15.1) million at December 31, 2021 and 2020, respectively.
The following table summarizes the (income) loss allocated to noncontrolling interest in consolidated entities (in
thousands):
(Income) loss from consolidated entities attributable to noncontrolling interests ................................. $ 2,650 $ 6,436 $ (2,032)
Year Ended December 31,
2021
2020
2019
13. 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
140
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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
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 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, 2021, 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.
The issuance activity is summarized below (in thousands):
Year Ended December 31,
2021
2020
2019
Series B Convertible Preferred Stock shares issued ..............................................................................................
Gross proceeds received ........................................................................................................................................ $
Commissions .........................................................................................................................................................
—
23
— $
439 $
—
7
Net proceeds .......................................................................................................................................................... $
— $
432 $
42
809
12
797
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):
Series B Convertible Preferred Stock ............................................................................................................... $
4,747 $
6,919 $
6,842
Year Ended December 31,
2021
2020
2019
141
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During 2021, Braemar entered into privately negotiated exchange agreements with certain holders of the Series B
Convertible Preferred Stock, in reliance on Section 3(a)(9) of the Securities Act. The table below summarizes the activity (in
thousands):
Year Ended December 31, 2021
Preferred Shares
Tendered
Common Shares
Issued
Series B Convertible Preferred Stock ....................................................................................................
1,953
7,291
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 is offering a maximum of 20,000,000 shares of Series E Preferred Stock in a primary offering price
of $25.00 per share. 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 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 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 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:
•
•
•
8.0% 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
7.5% per annum of the Stated Value beginning on the second anniversary from the Date of Initial Closing.
142
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Dividends will be authorized and declared on a monthly basis and payable in arrears on the 15th of each month to holders
of record at the close of business on the last business day of each month immediately preceding the applicable thereafter
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 for 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):
Series E Preferred Stock shares issued (1)
.............................................................................................................................................
Net proceeds ......................................................................................................................................................................................... $
1,709
38,450
Year Ended December 31,
2021
__________________
(1)
Exclusive of shares issued under the dividend reinvestment plan.
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):
Series E Preferred Stock ............................................................................................................................................. $
Adjustments to Series E Preferred Stock (1)
................................................................................................................ $
39,339 $
3,128 $
—
—
December 31, 2021 December 31, 2020
________
(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,
2021
Series E Preferred Stock .................................................................................................................................................................... $
683
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 is offering a maximum of 20,000,000 shares of the Series M Preferred Stock (par value $0.01) in a
primary offering price of $25.00 per share (or “Stated Value”). 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 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 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.
143
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 below) 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 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 (the “Series M Original Issue Date”) 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.
Dividends will be authorized and declared on a monthly basis and payable in arrears on the 15th of each month 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 for 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,
2021
Series M Preferred Stock shares issued .........................................................................................................................................
Net proceeds .................................................................................................................................................................................. $
29
704
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):
Series M Preferred Stock ............................................................................................................................................ $
Adjustments to Series M Preferred Stock (1)
............................................................................................................... $
715 $
133 $
—
—
December 31, 2021 December 31, 2020
________
(1) Reflects the excess of the redemption value over the accumulated carrying value.
The following table summarizes dividends declared (in thousands):
Series M Preferred Stock .............................................................................................................................................................. $
15
14. Stock-Based Compensation
Under the 2013 Equity Incentive Plan, as amended, we are authorized to grant 3.3 million restricted stock or performance
stock units of our common stock as incentive stock awards. At December 31, 2021, approximately 774,000 shares were
available for future issuance under the 2013 Equity Incentive Plan.
Year Ended December 31,
2021
144
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
At December 31, 2021, the unamortized cost of unvested shares of restricted stock was $1.8 million, which is expected to
be recognized over a period of 2.4 years with a weighted average period of 1.9 years.
The following table summarizes the stock-based compensation expense for restricted stock (in thousands):
Line Item
Advisory services fee ......................................................................................................... $
Management fees ................................................................................................................
Corporate general and administrative ................................................................................
Corporate general and administrative - independent directors ...........................................
$
A summary of our restricted stock activity is as follows (shares in thousands):
Year Ended December 31,
2020
2019
2021
3,028 $
56
111
322
3,517 $
2,672 $
133
71
130
3,006 $
2,468
155
72
208
2,903
2021
Year Ended December 31,
2020
2019
Weighted
Average
Price at
Grant
Weighted
Average
Price at
Grant
Number of
Units
Weighted
Average
Price at
Grant
Number of
Units
Number of
Units
Outstanding at beginning of year ....................
Restricted shares granted ................................
Restricted shares vested ..................................
Restricted shares forfeited ..............................
Outstanding at end of year ..............................
536 $
764
(317)
(26)
957 $
7.98
7.02
6.31
6.94
6.94
497 $
359
(310)
(10)
536 $
11.89
4.13
9.81
7.25
7.98
441 $
261
(198)
(7)
497 $
10.91
12.68
10.75
11.59
11.89
The fair value of restricted stock vested during the years ended December 31, 2021, 2020 and 2019 was approximately
$2.1 million, $1.2 million and $2.2 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.
With respect to the 2019 and 2020 award agreements, the number of PSUs actually earned may range from 0% to 200% of
target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s
compensation committee on the grant date. The performance criteria for the PSUs are based on market 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, regardless of the actual outcome of the market condition.
With respect to the 2021 award agreements, the compensation committee shifted to a new 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 commencing on January 1, 2021 and ending on December 31,
2023. The performance criteria for the 2021 performance grants are based on performance conditions under the relevant
literature, and the 2021 performance grants 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 grant 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.
145
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During the years ended December 31, 2021 and 2020, approximately 223,000 PSUs granted in 2019, and 197,000 PSUs
granted in 2018, respectively, 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 $143,000 and $202,000, respectively.
The following table summarizes the compensation expense for PSUs (in thousands):
Line Item
Year Ended December 31,
2020
2021
2019
Advisory services fee ........................................................................................................ $
3,374 $
2,695
2,439
At December 31, 2021, the unamortized cost of unvested shares of PSUs was $5.0 million, which is expected to be
recognized over a period of 2.0 years with a weighted average period of 1.7 years.
A summary of our PSU activity is as follows (shares in thousands):
2021
Year Ended December 31,
2020
2019
Weighted
Average
Price at
Grant
Weighted
Average
Price at
Grant
Weighted
Average
Price at
Grant
Number of
Units
Number of
Units
Number of
Units
Outstanding at beginning of year ....................
PSUs granted ...................................................
PSUs canceled .................................................
Outstanding at end of year ..............................
448 $
446
(223)
671 $
11.71
7.01
19.96
5.84
420 $
225
(197)
448 $
16.91
3.51
13.43
11.71
316 $
223
(119)
420 $
12.29
19.96
10.42
16.91
15. 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 1/12th 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
1/12th 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 and LTIP units awarded to officers and employees of Ashford LLC in
connection with providing advisory services.
146
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table summarizes the advisory services fees incurred (in thousands):
Advisory services fee ........................................................................................................
Year Ended December 31,
2021
2020
2019
Base advisory fee ............................................................................................................. $ 10,806 $
Reimbursable expenses (1)
................................................................................................
Equity-based compensation (2) ........................................................................................
Incentive fee (3)
................................................................................................................
2,297
9,538
—
Total ............................................................................................................................ $ 22,641 $ 18,486 $ 20,527
(678)
—
9,981 $ 10,834
1,790
7,393
2,289
7,404
________
(1)
Reimbursable expenses include overhead, internal audit, risk management advisory and asset management services.
(2)
(3)
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.
The $(678,000) incentive fee in 2020 is a result of not meeting the FCCR threshold required for paying the final installment of the incentive fee incurred
in 2018.
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 Braemar, Ashford Trust, 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.'s risk management department
manages the casualty insurance program. At the beginning of each year, Ashford Inc.'s risk management department collects
funds from Braemar, Ashford Trust and their respective hotel management companies, to fund the casualty insurance program
as needed, on an allocated basis.
Lismore
On March 20, 2020, the Company entered into an agreement with Lismore, a subsidiary of Ashford Inc., to engage
Lismore to seek modifications, forbearances or refinancings of the Company’s loans (the “Lismore Agreement”). The Lismore
Agreement was terminated effective March 20, 2021.
Upon entering into the agreement with Lismore, the Company made an initial payment of approximately $1.4 million. The
Company paid approximately $1.4 million related to periodic installments of which $683,000 was expensed in accordance with
the agreement. The remaining $681,000 was set off against the cash payment of the base advisory fee per the agreement upon
contract termination in March 2021. Further, the Company paid approximately $1.4 million in success fees in connection with
signed forbearance or other agreements. In total, the Company paid approximately $4.1 million under the Lismore Agreement.
For the years ended December 31, 2021 and 2020, the Company recognized expense of $341,000 and $3.1 million,
respectively. These expenses are included in “write-off of loan costs and exit fees” in the consolidated statements of operations.
On August 25, 2020, in light of the fact that Lismore negotiated access to the FF&E reserves but no forbearance on debt
service for the $435 million mortgage loan secured by the Marriott Seattle Waterfront, Sofitel Chicago Magnificent Mile, The
Notary Hotel and The Clancy, the independent members of the board of directors of Ashford Inc. waived $1.6 million of
Lismore success fees associated with items (ii) and (iii) above.
The Company engaged Lismore to negotiate, on the Company’s behalf, one or more modifications to the terms of the
mortgage loan assumed in connection with the acquisition of the Mr. C Beverly Hills Hotel. Upon closing of the hotel, the
Company paid Lismore a fee of $150,000.
Ashford Securities
On September 25, 2019, Ashford Inc. announced the formation of Ashford Securities LLC (“Ashford Securities”) to raise
retail capital in order to grow its existing and future platforms. In conjunction with the formation of Ashford Securities,
Braemar has entered into a contribution agreement (the “Initial Contribution Agreement”) with Ashford Inc. pursuant to which
Braemar has agreed to contribute, with Ashford Trust, up to $15.0 million to fund the operations of Ashford Securities. Costs
for all operating expenses of Ashford Securities that were contributed by Ashford Trust and Braemar will be expensed as
incurred. These costs were allocated initially to Ashford Trust and Braemar based on an allocation percentage of 75% to
Ashford Trust and 25% Braemar. Upon reaching the earlier of $400 million in aggregate non-listed preferred equity offerings
147
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
raised or June 10, 2023, there will be a true up (the “Initial True-Up Date”) between Ashford Trust and Braemar, whereby the
actual capital contributions contributed by each company will be based on the actual amount of capital raised by Ashford Trust
and Braemar, respectively. After the Initial True-Up Date, the capital contributions will be allocated between Ashford Trust and
Braemar quarterly based on the actual capital raised through 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 with respect to expenses to be reimbursed by
Ashford Securities. The Initial True-Up Date did not occur, and beginning on the effective date of the Amended and Restated
Contribution Agreement, costs will be 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 non-listed preferred equity offerings raised, or
June 10, 2023, there will be an amended and restated true up (the “Amended and Restated True-Up Date”) among Ashford Inc.,
Ashford Trust and Braemar whereby the actual expense reimbursement paid by each company will be based on the actual
amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively, through Ashford Securities. After the
Amended and Restated True-Up Date, the expense reimbursements will be allocated among Ashford Inc., Ashford Trust and
Braemar quarterly based on the actual capital raised through Ashford Securities. Additionally, Braemar’s aggregate Capital
Contributions under the Initial Contribution Agreement and the Amended and Restated Contribution Agreement shall not
exceed $3.75 million unless otherwise agreed to in writing by Braemar.
As of December 31, 2021, Braemar has funded approximately $3.5 million. Additionally, as of December 31, 2021,
$338,000 of the pre-funded amount was included in “other assets” on our consolidated balance sheets.
The table below summarizes the amount Braemar has expensed related to reimbursed operating expenses of Ashford
Securities (in thousands):
Corporate, general and administrative .................................................................................................................
$
1,983 $
658 $
314
Line Item
Year Ended December 31,
2021
2020
2019
Enhanced Return Funding Program
Concurrent with Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement with Ashford Inc.
(“Amendment No. 1”), on January 15, 2019, the Company also entered into the Enhanced Return Funding Program Agreement
(the “ERFP Agreement”) with Ashford Inc. The “key money investments” concept previously contemplated by our advisory
agreement was replaced with the ERFP Agreement. The Fifth Amended and Restated Advisory Agreement was also amended
to name Ashford Inc. and its subsidiaries as the Company’s sole and exclusive provider of asset management, design and
construction and other services offered by Ashford Inc. or any of its subsidiaries. The independent members of our board of
directors and the independent members of the board of directors of Ashford Inc., with the assistance of separate and
independent legal counsel, engaged to negotiate the ERFP Agreement on behalf of Ashford Inc. and Braemar, respectively.
The ERFP Agreement generally provides that Ashford LLC will provide funding to facilitate the acquisition of properties
by Braemar OP that are recommended by Ashford LLC, in an aggregate amount of up to $50 million (subject to increase to up
to $100 million by mutual agreement). Each funding will equal 10% of the property acquisition price and will be made either at
the time of the property acquisition or at any time generally within the two-year period following the date of such acquisition, in
exchange for FF&E for use at the acquired property or any other property owned by Braemar OP.
The initial term of the ERFP Agreement was two years (the “Initial Term”). At the end of the Initial Term, the ERFP
Agreement automatically renewed for one year and shall automatically renew for successive one-year periods (each such period
a “Renewal Term”) unless either Ashford Inc. or Braemar provides written notice to the other at least sixty days in advance of
the expiration of the Initial Term or Renewal Term, as applicable, that such notifying party intends not to renew the ERFP
Agreement.
As a result of The Ritz-Carlton Lake Tahoe acquisition, Braemar was entitled to receive $10.3 million from Ashford LLC
in the form of future purchases of FF&E at Braemar hotel properties that will be leased to us by Ashford LLC rent-free. As of
December 31, 2021, Ashford LLC has remitted payments of $10.3 million to the Company as further described below.
On June 26, 2019 and July 1, 2019, the Company sold $1.4 million and $8.9 million, respectively, of hotel FF&E from
Braemar hotel properties to Ashford LLC which was subsequently leased back to the Company rent-free. In accordance with
ASC 842, the Company evaluated the transactions and concluded that the transaction qualified as a sale. As a result, the
Company recorded gains of $9,000 and $23,000, respectively, for the year ended December 31, 2019. The gains are recorded in
148
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
“gain (loss) on insurance settlement, disposition of assets and sale of hotel property” in our consolidated statements of
operations.
Under the applicable accounting guidance in ASC 842, the Company has not recorded an operating lease right-of-use asset,
an operating lease liability or lease expense for rents as the related party lease has no economic substance because the related
party lease is provided rent-free.
In 2015, prior to the inception of the ERFP program, $2.0 million of key money consideration was invested in FF&E by
Ashford LLC to be used by Braemar, which represented all of the key money consideration for the Bardessono Hotel and Spa.
Upon adoption of ASC 842, we evaluated this arrangement, which was accounted for as a lease that expired in 2020. Under the
applicable guidance in ASC 842, as the related party lease is provided rent-free, there is no economic substance related to the
lease which results in not recording an operating lease right-of-use asset, an operating lease liability or lease expense for rents.
Upon expiration of the lease the underlying FF&E was purchased from Ashford Inc. for $200,000.
In 2021, the Company sold approximately $1.6 million of hotel FF&E from Braemar hotel properties to Ashford LLC,
which was subsequently leased back to the Company rent-free. In accordance with ASC 842, the Company evaluated the
transactions and concluded that the transactions qualified as sales. As a result, the Company recorded an aggregate gain of
$197,000 for the year ended December 31, 2021. The gains are recorded in “gain (loss) on insurance settlement, disposition of
assets and sale of hotel properties” in our consolidated statements of operations.
Upon expiration of an ERFP lease, the Company purchased the underlying FF&E from Ashford Inc. at fair value for
$144,000, which was paid during the third quarter of 2021.
On November 8, 2021, the Company received written notice from the Advisor of its intention not to renew the ERFP
program. As a result, the ERFP Agreement terminated in accordance with its terms on January 15, 2022.
Design and Construction Services
In connection with Ashford Inc.’s August 8, 2018 acquisition of Remington Lodging’s design and construction business,
we entered into a design and construction services agreement with Ashford Inc.’s subsidiary, Premier Project Management LLC
(“Premier”), pursuant to which Premier 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). On March 20, 2020, we amended the design and construction services agreement to provide that Premier’s fees
shall be paid by the Company to Premier upon the completion of any work provided by third-party vendors to the Company.
Hotel Management Services
On November 6, 2019, Ashford Inc. completed the acquisition of Remington Lodging’s hotel management business.
Following the acquisition, hotel management services are provided by Remington Hotels, a subsidiary of Ashford Inc., under
the respective hotel management agreement with each customer, including Ashford Trust and Braemar.
At December 31, 2021, Remington Hotels managed four of our 14 hotel properties.
We pay monthly hotel management fees equal to the greater of approximately $15,000 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.
Pursuant to the terms of the Letter Agreement dated March 13, 2020 (the “Hotel Management Letter Agreement”), in order
to allow Remington Hotels to better manage its corporate working capital and to ensure the continued efficient operation of our
hotels, we agreed to pay the base fee and to reimburse all expenses on a weekly basis for the preceding week, rather than on a
monthly basis. The Hotel Management Letter Agreement went into effect on March 13, 2020 and will continue until terminated
by us.
149
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We also have a mutual exclusivity agreement with Remington Hotels, pursuant to which: (i) we have agreed to engage
Remington Hotels to provide management services with respect to any hotel we acquire or invest in, to the extent we have the
right and/or control the right to direct the management of such hotel; and (ii) Remington Hotels has agreed to grant us a right of
first refusal to purchase any opportunity to develop or construct a hotel that it identifies that meets our initial investment
guidelines. We are not, however, obligated to engage Remington Hotels if our independent directors either: (i) unanimously
vote to hire a different manager or developer; or (ii) by a majority vote elect not to engage such related party because either
special circumstances exist such that it would be in the best interest of our Company not to engage such related party, or, based
on related party’s prior performance, it is believed that another manager could perform the management or other duties
materially better.
Ashford Trust
As of December 31, 2021, the Company had a $728,000 receivable from Ashford Trust, included in “due from related
parties, net.” The receivable relates to a legal settlement between Ashford Trust and the City of San Francisco regarding a
transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off
from Ashford Trust. The transfer taxes were initially paid by Braemar at the time of the spin-off. The $728,000 gain is included
in “(gain) loss on legal settlements” on the consolidated statements of operations. In January 2022, the City of San Francisco
remitted payment to Ashford Trust, which subsequently remitted payment to Braemar.
Remington Lodging (prior to Ashford Inc. acquisition)
Remington Lodging was a hotel and design and construction company, wholly owned by our chairman, Mr. Monty J.
Bennett and Mr. Archie Bennett, Jr. who is Ashford Trust’s chairman emeritus. We had master hotel and design and
construction services agreements and hotel and design and construction services mutual exclusivity agreements with Remington
Lodging.
On November 6, 2019, Ashford Inc. completed the acquisition of Remington Lodging’s hotel management business. As a
result of the acquisition, hotel management services that were previously provided by Remington Lodging are now be provided
by a subsidiary of Ashford Inc. under the respective hotel management agreement with each customer, including Ashford Trust
and Braemar under the Remington Hotels name.
Between January 1, 2019 and November 5, 2019, we paid Remington Lodging monthly hotel management fees equal to the
greater of approximately $14,000 (increased annually based on consumer price index adjustments) or 3% of gross revenues as
well as annual incentive hotel management fees, if certain operational criteria were met and other general and administrative
expense reimbursements primarily related to accounting services.
The following table presents the fees related to our hotel and design and construction services agreements with Remington
Lodging prior to its transactions with Ashford Inc. (in thousands):
Hotel management fees, including incentive hotel management fees ................................................................. $
Corporate general and administrative ..................................................................................................................
Total ................................................................................................................................................................ $
1,738
297
2,035
Year Ended December 31,
2019
150
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, 2021
Company
Product or Service
Total
Investments
in Hotel
Properties,
net (1)
Indebtedness,
net (2)
Other
Assets
Other
Hotel
Revenue
Other
Hotel
Expenses
Preferred
Stock (3)
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
$
7
$
Ashford Securities .. Broker/Dealer
Ashford Securities .. Dealer Manager Fees
INSPIRE ................. Audio visual services
Lismore Capital ...... Debt placement and related
services
Lismore Capital ...... Broker services
OpenKey ................. Mobile key app
1,983
410
1,001
491
3
38
$
—
—
—
—
—
—
—
Premier .................... Design and construction services
3,009
2,653
Pure Wellness ......... Hypoallergenic premium rooms
RED Leisure ........... Watersports activities and travel/
transportation services
141
321
Remington Hotels ... Hotel management services (4)
3,243
—
—
—
—
—
—
—
150
—
—
—
—
—
—
$ —
$
—
—
—
—
—
—
—
—
—
—
$
—
—
—
1,001
—
—
—
—
—
321
—
$
—
—
—
—
—
—
38
—
141
—
934
$
—
—
410
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,309
$
7
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
356
—
—
—
$
—
$
1,983
—
—
—
—
—
—
—
—
—
—
—
—
—
341
3
—
—
—
—
—
Company
Product or Service
Total
Year Ended December 31, 2020
Investments
in Hotel
Properties,
net (1)
Other
Assets
Other
Hotel
Revenue
Other
Hotel
Expenses
Management
fees
Property
Taxes,
Insurance
and Other
Advisory
Services
Fee
Write-off of
Premiums,
Loan Costs
and Exit Fees
Ashford LLC ............ FF&E purchases
$ 1,816
$
1,816
$ —
$
Ashford LLC ............
Insurance claims services
INSPIRE ................... Audio visual services
Lismore Capital ........ Debt placement and related services
OpenKey ................... Mobile key app
108
592
4,093
38
—
—
—
—
—
—
1,022
—
Premier ..................... Design and construction services
2,849
2,505
—
Pure Wellness ........... Hypoallergenic premium rooms
RED Leisure .............
Watersports activities and travel/
transportation services
Remington Hotels ..... Hotel management services (4)
52
139
1,446
—
—
—
—
—
—
$
—
—
592
—
—
—
—
139
—
$
—
—
—
—
38
—
52
—
410
—
—
—
—
—
—
—
—
1,036
$
—
$
108
—
—
—
—
—
—
—
$
—
—
—
—
—
344
—
—
—
—
—
—
3,071
—
—
—
—
—
Company
Product or Service
Total
Investments
in Hotel
Properties,
net (1)
Indebtedness,
net (2)
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
Year Ended December 31, 2019
Ashford LLC ...
Insurance claims
services
$ 135
$
INSPIRE .......... Audio visual services
560
Lismore
Capital .............
Debt placement and
related services
OpenKey ......... Mobile key app
1,208
34
$
—
—
—
—
Premier ............ Design and construction
services
10,123
9,584
Pure Wellness .. Hypoallergenic
premium rooms
RED Leisure .... Watersports activities
and travel/
transportation services
Remington
Hotels ..............
Hotel management
services (4)
194
946
572
148
—
—
—
—
(995)
—
—
—
—
—
________
(1)
Recorded in FF&E and depreciated over the estimated useful life.
$
—
$
560
—
—
—
—
—
—
$
—
—
—
34
—
46
946
323
—
—
—
—
—
—
—
249
$
135
$
—
—
—
—
—
—
—
$
—
—
—
—
539
—
—
—
$
—
—
—
—
—
—
—
—
—
—
213
—
—
—
—
—
(2)
(3)
(4)
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.
Recorded as a reduction of Series E and Series M Redeemable Preferred Stock proceeds.
Other hotel expenses include incentive hotel management fees and other hotel management costs.
151
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):
Company
Product or Service
December 31, 2021
December 31, 2020
Ashford LLC ............................................................................. Advisory services
$
394 $
Ashford LLC ............................................................................. FF&E purchases
Ashford LLC .............................................................................
Insurance claims services
INSPIRE .................................................................................... Audio visual services
OpenKey ................................................................................... Mobile key app
Premier ...................................................................................... Design and construction services
RED Leisure .............................................................................. Watersports activities and travel/transportation services
—
1
418
—
470
191
165
1,816
12
1
3
631
144
$
1,474 $
2,772
Due to Ashford Inc.
As of December 31, 2021 and 2020, due from related parties, net included a net receivable from Remington Hotels of
$677,000 and $626,000, respectively, primarily related to advances made by Braemar and accrued base and incentive
management fees.
As of December 31, 2021 and 2020, due from related parties, net included a $365,000 security deposit paid to Remington
Hotel Corporation, an entity indirectly owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr., for office space allocated to
us under our advisory agreement. It will be held as security for the payment of our allocated share of office space rental. If
unused it will be returned to us upon lease expiration or earlier termination.
16. Commitments and Contingencies
Restricted Cash—Under certain management and debt agreements for our hotel properties existing at December 31, 2021,
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 4% to 5% of gross revenues for capital improvements.
Licensing Fees—In conjunction with the Mr. C Beverly Hills Hotel acquisition on August 5, 2021, we entered into an
Intellectual Property Sublease Agreement, which allows us to continue to use certain proprietary marks associated with the Mr.
C brand name. In return, we pay licensing fees of: (i) 1% of total operating revenue; (ii) 2% of gross food and beverage
revenues; and (iii) 25% of food and beverage profits. The agreement expires on August 4, 2022.
The table below summarizes the licensing fees incurred (in thousands):
Line Item
Other hotel expenses ..................................................................................................................................................................
Year Ended December 31, 2021
$
133
Management Fees—Under hotel management agreements for our hotel properties existing at December 31, 2021, we pay
a monthly hotel management fee equal to the greater of approximately $15,000 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 December 2023 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.
Income Taxes—We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years
2017 through 2021 remain subject to potential examination by certain federal and state taxing authorities.
Litigation—On October 24, 2019, the Company provided notice to Accor of the material breach of Accor’s responsibilities
under the Accor management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago,
Illinois. On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of
New York, New York County, seeking a declaratory judgment that no breach under the management agreement has occurred
and an injunction to prevent Ashford TRS Chicago II form terminating the management agreement. Accor’s complaint was
dismissed on or about February 27, 2020. On January 6, 2020, Ashford TRS Chicago II filed a complaint against Accor in the
Supreme Court of the State of New York, New York County, alleging breach of the Accor management agreement and seeking
damages and a declaration of its right to terminate the Accor management agreement. On July 20, 2020, Accor filed an
Amended Answer and Counterclaims against Ashford TRS Chicago II, in which Accor asserts two causes of action: First,
Accor asserts a counterclaim for declaratory judgment that Accor correctly calculated the amount payable to Ashford TRS
152
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chicago II under the management agreement to “cure” Accor’s performance test failure (the “Cure Amount”). Second, Accor
asserts a counterclaim for breach of contract alleging that Ashford TRS Chicago II breached the management agreement by
wrongfully maintaining that the Cure Amount for the 2018 and 2019 Performance Test failure is $1,031,549 instead of
$535,120. As of December 31, 2021, no amounts have been accrued. On February 16, 2022, the parties entered into a
settlement agreement agreeing to: 1) amend the management agreement; 2) dismiss the lawsuit and counterclaims; 3) stipulate
to the failure of the performance tests and cure amounts for 2018 of $867,682 and 2019 of $784,919; and 4) arbitrate whether
the performance tests for 2020 and 2021 were valid and/or required equitable adjustment. On February 23, 2022, Ashford TRS
Chicago II and Accor filed a stipulation of discontinuance dismissing all claims, counterclaims, and cross-claims in the January
6, 2020 action with prejudice.
One of the Company’s hotel management companies is currently involved in litigation regarding its employment policies
and practices at multiple California hotels, including one of the Company’s hotels. On January 28, 2022, the Court approved a
settlement of this litigation. The resulting loss to the Company is approximately $448,000; although it is entitled to
indemnification in the amount of approximately $291,000, based on the respective periods of ownership of the Company’s
hotel. As of December 31, 2021, approximately $500,000 was accrued.
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: (1) 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 (2) 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. While we believe it is reasonably possible that we may incur
a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal
issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth
in the applicable California employment laws, we do not believe any potential loss to the Company is reasonably estimable at
this time. As of December 31, 2021, no amounts have 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 ADA 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. However, our assessment may change depending upon the
development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty. If we
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 two non-cancelable operating ground leases, which expire in 2067 and 2065, related to our
hotel properties in La Jolla, California and Yountville, California, respectively. The lease in La Jolla, California contains one
extension option of either 10 or 20 years dependent upon capital investment spend during the lease term. The lease in
Yountville, California contains two 25-year extension options. These leases are subject to base rent plus contingent rent based
on each hotel property’s financial results and escalation clauses.
Capital Commitments—At December 31, 2021, we had capital commitments of $23.0 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.
17. Leases
On January 1, 2019, we adopted ASC 842 on a modified retrospective basis. We elected the practical expedients which
allowed us to apply the new guidance at its effective date on January 1, 2019 without adjusting the comparative prior period
financial statements. The package of practical expedients also allowed us to carry forward the historical lease classification.
153
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Additionally, we elected the practical expedients allowing us not to separate lease and non-lease components and not record
short-term leases on the balance sheet across all existing asset classes.
The adoption of this standard resulted in the recognition of operating lease ROU assets and lease liabilities primarily
related to our ground lease arrangements for which we are the lessee. As of January 1, 2019, we recorded operating lease
liabilities of $60.6 million as well as a corresponding operating lease ROU assets of $82.5 million, which includes, among other
things, the reclassified intangible assets of $22.3 million. The standard did not have a material impact on our consolidated
statements of operations and statements of cash flows.
The majority of our leases are operating ground leases. We also have 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 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, 2021.
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, 2021 and 2020, our leased assets and liabilities consisted of the following (in thousands):
Assets
Operating lease right-of-use assets ................................................................................................ $
80,462 $
81,260
December 31, 2021 December 31, 2020
Liabilities
Operating lease liabilities .............................................................................................................. $
60,937 $
60,917
We incurred the following lease costs related to our operating leases (in thousands):
Classification
2021
Year Ended December 31,
2020
2019
Operating lease cost (1)
.............. Hotel operating expenses - other
$
5,349 $
4,373 $
5,834
_______________________________________
(1)
For the years ended December 31, 2021, 2020 and 2019, operating lease cost includes approximately $954,000, $(305,000) and $1.4 million, respectively, of
variable lease cost associated with the ground leases, with the credit in 2020 primarily caused by the ground lease percentage rent true-up for fiscal year
2019-2020 at Hilton La Jolla Torrey Pines. Additionally, we recorded $512,000, $834,000 and $651,000, 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,
2021
2020
2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (in thousands) ................................... $
3,302
$
3,261
$
3,223
Weighted Average Remaining Lease Term
Operating leases (1)
..................................................................................................
45 years
47 years
47 years
Weighted Average Discount Rate
Operating leases (1)
..................................................................................................
4.98 %
4.98 %
4.98 %
_______________________________________
(1)
Calculated using the lease term, excluding extension options, and discount rates of the ground leases.
154
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Future minimum lease payments due under non-cancellable leases as of December 31, 2021 were as follows (in
thousands):
2022 ................................................................................................................................................................. $
2023 .................................................................................................................................................................
2024 .................................................................................................................................................................
2025 .................................................................................................................................................................
2026 .................................................................................................................................................................
Thereafter ........................................................................................................................................................
...................................................................................................
Less: interest ....................................................................................................................................................
Total future minimum lease payments (1)
Present value of operating lease liabilities .................................................................................................. $
Operating Leases
3,338
3,333
3,302
3,294
3,308
143,692
160,267
(99,330)
60,937
_______________________________________
(1)
Based on payment amounts as of December 31, 2021.
18. 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, 2021, 13 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 $12.6 million, $(27.0) million
and $31.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.
The following table reconciles the income tax expense at statutory rates to the actual income tax expense recorded (in
thousands):
Year Ended December 31,
2019
2020
2021
Income tax (expense) benefit at federal statutory income tax rate of 21% ............................. $ (2,652) $ 5,619 $ (6,509)
107
State income tax (expense) benefit, net of U.S. federal income tax benefit ............................
State and local income tax (expense) benefit on pass-through entity subsidiaries ..................
(16)
Gross receipts and margin taxes ..............................................................................................
(67)
Benefit of USVI Economic Development Commission credit ................................................
5,614
Other ........................................................................................................................................
16
Valuation allowance ................................................................................................................
(909)
Total income tax (expense) benefit .................................................................................. $ (1,324) $ 4,406 $ (1,764)
(5)
(13)
783
311
(5,425)
3,346
(251)
(2,306)
(9)
(26)
3,136
574
155
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The components of income tax expense are as follows (in thousands):
Current:
Year Ended December 31,
2019
2020
2021
Federal .............................................................................................................................. $ (1,477) $ 3,431 $
State ..................................................................................................................................
Total current income tax (expense) benefit ..............................................................
(21)
(1,498)
19
3,450
(765)
(235)
(1,000)
Deferred:
Federal ..............................................................................................................................
State ..................................................................................................................................
Total deferred income tax (expense) benefit ............................................................
(357)
(407)
(764)
Total income tax (expense) benefit ......................................................................................... $ (1,324) $ 4,406 $ (1,764)
1,262
(306)
956
131
43
174
For the years ended December 31, 2021, 2020 and 2019, income tax expense included interest and penalties paid to taxing
authorities of $3,000, $7,000 and $27,000, respectively. At December 31, 2021 and 2020, we determined that there were no
amounts to accrue for interest and penalties due to taxing authorities.
At December 31, 2021 and 2020, our net deferred tax asset, included in “other assets,” and net deferred tax liability,
included in “accounts payable and accrued expenses,” respectively, on our consolidated balance sheets, consisted of the
following (in thousands):
Deferred tax assets (liabilities):
December 31,
2021
2020
Tax intangibles basis greater than book basis .......................................................................................... $
Allowance for doubtful accounts .............................................................................................................
Unearned income......................................................................................................................................
Federal and state net operating losses ......................................................................................................
Capital Loss Carryforward .......................................................................................................................
Other .........................................................................................................................................................
Accrued expenses .....................................................................................................................................
Tax property basis greater than book basis ..............................................................................................
Prepaid expenses ......................................................................................................................................
Net deferred tax asset ..................................................................................................................................
Valuation allowance .................................................................................................................................
Net deferred tax asset (liability) .................................................................................................................. $
722 $
28
2,147
15,677
529
178
612
(2,487)
(4)
718
50
1,314
14,166
523
399
465
(2,721)
(91)
17,402
14,823
(17,343) (14,938)
(115)
59 $
At December 31, 2021 and 2020, we recorded a valuation allowance of $17.3 million and $14.9 million, respectively, to
partially reserve the deferred tax assets of our TRSs. Primarily as a result of the limitation imposed by the Code on the
utilization of net operating losses of acquired subsidiaries and the history of losses of our USVI TRS, we believe it is more
likely than not that $17.3 million of our deferred tax assets will not be realized, and therefore, have provided a valuation
allowance to reserve against the balances.
At December 31, 2021, we had TRSs net operating loss carryforwards for U.S. federal income tax purposes of $61.2
million, of which $52.3 million is subject to expiration and will begin to expire in 2023. The remainder was generated after
December 2017 and is not subject to expiration under the Tax Cuts and Jobs Act. $51.6 million of net operating loss
carryforwards are attributable to acquired subsidiaries and are subject to substantial limitation on their use. 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.
156
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table summarizes the changes in the valuation allowance (in thousands):
Year Ended December 31,
2019
2020
2021
Balance at beginning of year ................................................................................................... $ 14,938 $ 11,581 $ 14,483
Additions .................................................................................................................................
—
3,357
2,405
Deductions ..............................................................................................................................
(2,902)
Balance at end of year ............................................................................................................. $ 17,343 $ 14,938 $ 11,581
—
—
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 $907,000, $0 and
$807,000 for the years ended December 31, 2021, 2020 and 2019, respectively. The benefit of the tax holiday on net income
(loss) per share was approximately, $0.02, $0.00 and $0.02 for the years ended December 31, 2021, 2020 and 2019,
respectively.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law and
includes certain income tax provisions relevant to businesses. The Company is required to recognize the effect on the
consolidated financial statements in the period the law was enacted. For the year ended December 31, 2020, the CARES Act
allowed us to record a tax benefit of $3.4 million for the 2020 net operating loss at our TRS that was carried back to prior tax
years.
On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law, and extended several COVID-19
tax related measures passed as part of the “CARES Act.” The Company is required to recognize the effect on the consolidated
financial statements in the period the law was enacted, which was the period ended December 31, 2020. The Consolidated
Appropriations Act, 2021 did not have a material impact on the Company’s consolidated financial statements for the year ended
December 31, 2020.
19. Intangible Assets, net
Intangible assets, net consisted of the following (in thousands):
Cost ............................................................................................................................................................. $ 5,682 $ 5,682
Accumulated amortization ..........................................................................................................................
(1,042)
$ 4,261 $ 4,640
(1,421)
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, 2021, 2020 and 2019, amortization related to intangible assets was $379,000, $379,000
and $379,000, respectively.
December 31,
2021
2020
157
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Estimated future amortization expense for intangible assets, net for each of the next five years and thereafter is as follows
(in thousands):
2022 ........................................................................................................................................................ $
2023 ........................................................................................................................................................
2024 ........................................................................................................................................................
2025 ........................................................................................................................................................
2026 ........................................................................................................................................................
Thereafter ...............................................................................................................................................
Total ....................................................................................................................................................... $
379
379
379
379
379
2,366
4,261
Intangible Assets, net
20. 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, 2021, three of our hotel properties generated revenues in excess of 10% of total
hotel revenue amounting to 48% 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.
21. Segment Reporting
We operate in one 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 have similar economic characteristics and exhibit
similar long-term financial performance. As of December 31, 2021 and December 31, 2020, all of our hotel properties were in
the U.S. and its territories.
22. Subsequent Event
On February 2, 2022, the Company refinanced its mortgage loan secured by the Park Hyatt Beaver Creek Resort & Spa,
which had a final maturity date in April 2022. The new, non-recourse mortgage loan totals $70.5 million and has a two-year
initial term with three one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is interest
only and provides for a floating interest rate of SOFR + 2.86%.
158
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our
management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2021. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, our disclosure controls and procedures
are effective to ensure that (i) information required to be disclosed in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii)
information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosures.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the
assessment of the effectiveness of our internal control over financial reporting. The internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that receipts and our expenditures are being made
only in accordance with authorizations of management and our directors and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on
the financial statements.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making
the assessment of the effectiveness of our internal control over financial reporting, management has utilized the criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission, (2013 framework) (“COSO”).
Based on management’s assessment of these criteria, we concluded that, as of December 31, 2021, our internal control over
financial reporting is effective. The effectiveness of our internal control over financial reporting as of December 31, 2021 has
been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their report which appears in
this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during our most recent fiscal quarter ended
December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over
financial reporting.
159
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Braemar Hotels & Resorts Inc.
Dallas, Texas
Opinion on Internal Control over Financial Reporting
We have audited Braemar Hotels & Resorts Inc.’s (the “Company’s”) internal control over financial reporting as of December
31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, 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, 2021, and the related notes and schedule and our report dated March 10, 2022 expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A,
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, LLP
Dallas, Texas
March 10, 2022
160
Item 9B. Other Information
Opinion of the Liquidation Value of our Series E Preferred Stock and Series M Preferred Stock as of December 31, 2021
In order to assist broker-dealers in complying with their obligations under FINRA Rule 2331(c)(1)(B) with respect to
customer account statements and our Series E Preferred Stock and our Series M Preferred Stock, we engaged Robert A. Stanger
& Co., Inc. (“Stanger”) to provide an opinion of the liquidation value of our Series E Preferred Stock and our Series M
Preferred Stock as of December 31, 2021 (the “Valuation Date”). The liquidation value is the amount that a holder of the Series
E Preferred Stock or the Series M Preferred Stock would receive per share in the event of our liquidation. Based on certain
assumptions and qualifications set forth in its report, Stanger concluded that the estimated liquidation value of the Series E
Preferred Stock and the Series M Preferred Stock was $25.00 per share, which equals the per share liquidation preference for
each series as set forth in the articles supplementary creating the Series E and the Series M Preferred Stock. In arriving at this
conclusion, Stanger used the following valuation approaches:
Market capitalization. Stanger reviewed the public market capitalization of our common stock at its 52-week low, its 52-
week high and the closing price as of the Valuation Date. Stanger adjusted the common market capitalization for the liquidation
value of the preferred securities to determine an adjusted market capitalization. In all cases, the preferred stock coverage ratio,
which is the ratio of the adjusted market capitalization to the total liquidation preference for all of our outstanding preferred
securities, was adequate as of the Valuation Date.
Analyst target prices. Stanger reviewed the then most recent (November 2021) target common stock prices published by
analysts at investment banks and other financial firms (four in total). Using the lowest target price, the highest target price and
the average or “consensus” price Stanger estimated the common market capitalization as of the Valuation Date. Stanger
adjusted the common market capitalization for the liquidation value of the preferred securities to determine an adjusted market
capitalization. In all cases, the preferred stock coverage ratio, which is the ratio of the adjusted market capitalization to the total
liquidation preference for all of our outstanding preferred securities, was adequate as of the Valuation Date.
Direct capitalization analysis. Stanger chose a range of capitalization rates it believed to be appropriate for our asset type
and multiplied them with our aggregate “capitalized net operating income” to determine an estimated range of real estate
values, deducted our indebtedness, and adjusted for available working capital and for estimated non-controlling interests due to
third parties as of the Valuation Date, to derive an estimate of our equity value (before accounting for the preferred securities).
To arrive at our stabilized “capitalized net operating income,” Stanger used the higher of the 2019 net operating income
(“NOI”) or budgeted 2022 NOI for each property (believing that 2020 and 2021 NOI was not appropriate on account of
COVID-19 disruptions). For those properties where 2019 NOI was capitalized, Stanger deducted the loss to lease (the
difference between 2022 budget NOI and 2019 NOI) from the capitalized value. Using the highest and lowest capitalization
rates in Stanger’s range, our equity value exceeded the total liquidation preference for all of our outstanding preferred securities
as of the Valuation Date.
Third-party appraisals. Stanger prepared a range of equity values based upon the most recent appraised values of our assets
(on an “as is” and “stabilized” basis), deducted our indebtedness, and adjusted for available working capital and the estimated
non-controlling interests due to third parties as of the Valuation Date, to derive an estimate of our equity value (before
accounting for the preferred securities). The most recent appraisals available for each property were from February 2018
through January 2022. The age of the “as-is” appraisals averaged 2.8 years. Using the “as is” values and the “stabilized” values,
our equity value exceeded the total liquidation preference for all of our outstanding preferred securities.
Stanger is engaged in the business of providing valuation services for real estate assets and consulting services for non-
traded REITs and their sponsors as well as for other real estate programs. Stanger has not previously provided services to us.
However, Stanger has provided consulting services to Ashford Securities, a subsidiary of Ashford Inc., since 2019 and has
received fees in connection with those services. As previously disclosed, we provide funds to Ashford Inc. in connection with
the formation, registration and operations of Ashford Securities.
Limited Waiver Under Advisory Agreement
On March 10, 2022, we entered into a Limited Waiver Under Advisory Agreement (the “Limited Waiver”) with Braemar
OP, Braemar TRS and our advisor.
As previously disclosed, our advisory agreement (i) allocates responsibility for certain employee costs between us and our
advisor and (ii) permits our Board of Directors to issue annual equity awards in the Company or the Operating Partnership to
employees and other representatives of our advisor based on achievement by the Company of certain financial or other
objectives or otherwise as our Board of Directors sees fit. Pursuant to the Limited Waiver, the Company, Braemar OP, Braemar
161
TRS and our 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 2022 cash
incentive compensation to employees and other representatives of our advisor.
The foregoing description of the Limited Waiver does not purport to be complete and is subject to, and qualified in its
entirety by, the full text of the Limited Waiver, a copy of which is attached hereto as Exhibit 10.39 and is incorporated herein
by reference.
The foregoing information is included for the purpose of providing the disclosures required under “Item 1.01 - Entry into a
Material Definitive Agreement,” of Current Report on Form 8-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement to
be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement to
be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement to
be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement to
be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K.
Item 14. Principal Accountant Fees and Services
The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement to
be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K.
Item 15. Exhibits, Financial Statement Schedules
(a), (c) Financial Statement Schedules
PART IV
See “Item 8. Financial Statements and Supplementary Data,” on pages 109 through 158 hereof, for a list of our
consolidated financial statements and report of independent registered public accounting firm.
The following financial statement schedule is included herein on page 170 through page 171 hereof.
Schedule III – Real Estate and Accumulated Depreciation
All other financial statement schedules have been omitted because such schedules are not required under the related
instructions, such schedules are not significant, or the required information has been disclosed elsewhere in the consolidated
financial statements and related notes thereto.
162
(b) Exhibits
Exhibit
Number
2.1
2.2
2.3
3.1
3.1.1
3.1.2
3.1.3
3.2
3.3
3.4
3.5
3.6
3.6.1
3.6.2
3.7
3.8
3.9
3.10
3.11
Exhibit Description
Separation and Distribution Agreement between Ashford Hospitality Prime, Inc., Ashford Hospitality Trust, Inc.
and the other parties thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on
November 12, 2013) (File No. 001-35972)
Separation and Distribution Agreement Correction between Ashford Hospitality Prime, Inc., Ashford Hospitality
Trust, Inc. and the other parties thereto (incorporated by reference to Exhibit 2.2 of the Registration Statement on
Form S-11 filed on December 19, 2013) (File No. 001-35972)
Agreement of Purchase and Sale, dated as of May 20, 2016, by and between Washington Real Estate Holdings,
LLC and Ashford Seattle Downtown LP (incorporated by reference to Exhibit 2.1 to the Current Report on Form
8-K filed on July 7, 2016) (File No. 001-35972)
Articles of Amendment and Restatement of Ashford Hospitality Prime, Inc. (incorporated by reference to Exhibit
3.1 to the Current Report on Form 8-K filed on April 29, 2016) (File No. 001-35972)
Amendment Number One to the Articles of Amendment and Restatement of Ashford Hospitality Prime, Inc.
(incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 8, 2017) (File
No. 001-35972)
Amendment Number Two to Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc.
(incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 23, 2018) (File No.
001-35972)
Articles of Amendment of Braemar Hotels & Resorts Inc., accepted for record and certified by the SDAT on
January 23, 2020 (incorporated by reference to Exhibit 3.13 to Amendment No. 1 to the Registration Statement
on Form S-3 (File No. 333-234663) filed with the SEC on January 24, 2020)
Fourth Amended and Restated Bylaws of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1
to the Current Report on Form 8-K filed on August 20, 2018) (File No. 001-35972)
Articles of Amendment of Ashford Hospitality Prime, Inc. (incorporated by reference to Exhibit 3.2 to the
Current Report on Form 8-K filed on April 29, 2016) (File No. 001-35972)
Articles Supplementary of Ashford Hospitality Prime, Inc. (incorporated by reference to Exhibit 3.3 to the
Current Report on Form 8-K filed on April 29, 2016) (File No. 001-35972)
Articles Supplementary for 5.50% Series A Cumulative Convertible Preferred Stock of Ashford Hospitality
Prime, Inc., as amended by a Certificate of Correction (incorporated by reference to Exhibit 3.4 to the Current
Report on Form 8-K filed on April 29, 2016) (File No. 001-35972)
Articles Supplementary for 5.50% Series B Cumulative Convertible Preferred Stock of Ashford Hospitality
Prime, Inc., accepted for record and certified by the Maryland State Department of Assessments and Taxation on
December 4, 2015 (incorporated by reference to Exhibit 3.5 to the Current Report on Form 8-K filed on April 29,
2016) (File No. 001-35972)
Articles Supplementary Establishing Additional Shares of the Series B Preferred Stock of Ashford Hospitality
Prime, Inc., as filed with the State Department of Assessments and Taxation of Maryland on March 3, 2017
(incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on March 7, 2017) (File No.
001-35972)
Articles Supplementary Establishing Additional Shares of Series B Preferred Stock of Braemar Hotels & Resorts
Inc., accepted for record and certified by the Maryland State Department of Assessments and Taxation on
December 4, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on
December 4, 2019) (File No. 001-35972)
Articles Supplementary for the Series C Preferred Stock of Ashford Hospitality Prime, Inc., as filed with the State
Department of Assessments and Taxation of Maryland on February 1, 2016 (incorporated by reference to Exhibit
3.6 to the Current Report on Form 8-K filed on April 29, 2016) (File No. 001-35972)
Articles Supplementary for the Series D Cumulative Preferred Stock, accepted for record and certified by the
Maryland State Department of Assessments and Taxation on November 19, 2018 (incorporated by reference to
Exhibit 3.1 to the Current Report on Form 8-K filed on November 19, 2018) (File No. 001-35972)
Articles Supplementary Establishing the Series E Redeemable Preferred Stock of Braemar Hotels & Resorts Inc.,
accepted for record and certified by the SDAT on April 2, 2021. (incorporated by reference to Exhibit 3.1 to the
Current Report on Form 8-K filed on April 2, 2021) (File No. 001-35972)
Certificate of Correction of Series E Articles Supplementary of Braemar Hotels & Resorts Inc., accepted for
record and certified by the SDAT on November 4, 2021. (incorporated by reference to Exhibit 3.1 to the
Quarterly Report on Form 10-Q filed on November 5, 2021) (File No. 001-35972)
Articles Supplementary Establishing the Series M Redeemable Preferred Stock of Braemar Hotels & Resorts Inc.,
accepted for record and certified by the SDAT on April 2, 2021. (incorporated by reference to Exhibit 3.2 to the
Current Report on Form 8-K filed on April 2, 2021) (File No. 001-35972)
163
3.12
4.1
4.2
4.3
4.4
4.5
4.6 *
10.1
10.1.1
10.1.2
10.1.3
10.1.4
10.1.5
10.2
10.2.1
10.2.2
10.3
10.4
10.5†
10.6
Certificate of Correction of Series M Articles Supplementary of Braemar Hotels & Resorts Inc., accepted for
record and certified by the SDAT on November 4, 2021. (incorporated by reference to Exhibit 3.1 to the
Quarterly Report on Form 10-Q filed on November 5, 2021) (File No. 001-35972)
Specimen Common Stock Certificate of Ashford Hospitality Prime, Inc. (incorporated by reference to Exhibit 4.1
to Amendment No. 4 to the Registration Statement on Form 10 filed on October 23, 2013) (File No. 001-35972)
Preemptive Rights Agreement, dated as of June 9, 2015, by and among Ashford Hospitality Prime, Inc. and
certain investors in the Series A Preferred Stock (incorporated by reference to Exhibit 4.3 to the Current Report
on Form 8-K filed on June 15, 2015) (File No. 001-35972)
Registration Rights Agreement, dated December 4, 2015, by and among the Company, the Operating Partnership,
the Advisor and certain holders of the Series B Preferred Stock (Incorporated by reference to Exhibit 4.2 to the
Current Report on Form 8-K filed on December 10, 2015) (File No. 001-35972)
Preemptive Rights Agreement, dated as of December 4, 2015, by and among the Company and the Series B
Investors (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed on December 10,
2015) (File No. 001-35972)
Indenture, dated as of May 18, 2021, by and among the Company, as issuer, and the Trustee, as trustee, including
the Form of Note representing the Company’s 4.50% Convertible Senior Notes due 2026. (incorporated by
reference to Exhibit 1.1 to the Current Report on Form 8-K filed on May 18, 2021) (File No. 001-35972)
Description of Securities
Third Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Prime Limited
Partnership, dated March 7, 2017 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed on March 7, 2017) (File No. 001-35972)
Amendment No. 2 to the Third Amended and Restated Agreement of Limited Partnership of Braemar Hotels &
Resorts Limited Partnership, dated November 20, 2018 (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed on November 20, 2018) (File No. 001-35972)
Amendment No. 3 to the Third Amended and Restated Agreement of Limited Partnership of Braemar Hospitality
Limited Partnership (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on
December 4, 2019) (File No. 001-35972)
Amendment No. 4 to the Third Amended and Restated Agreement of Limited Partnership of Braemar Hospitality
Limited Partnership (incorporated by reference to Exhibit 10.1 of Form 8-K filed on January 24, 2020)
Amendment No. 5 to the Third Amended and Restated Agreement of Limited Partnership of Braemar Hospitality
Limited Partnership. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April
2, 2021) (File No. 001-35972)
Amendment No. 6 to the Third Amended and Restated Agreement of Limited Partnership of Braemar Hospitality
Limited Partnership. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May
18, 2021) (File No. 001-35972)
Fifth Amended and Restated Advisory Agreement, dated as of April 23, 2018, among Braemar Hotels & Resorts
Inc., Braemar Hospitality Limited Partnership, Braemar TRS Corporation, Ashford Hospitality Advisors LLC and
Ashford Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on April 23, 2018) (File
No. 001-35972)
Enhanced Return Funding Program Agreement and Amendment No. 1 to the Fifth Amended and Restated
Advisory Agreement, dated January 15, 2019, by and among Braemar Hotels & Resorts Inc., Braemar Hospitality
Limited Partnership, Braemar TRS Corporation, Ashford Inc. and Ashford Hospitality Advisors LLC
(incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on January 18, 2019) (File No.
001-35972)
Amendment No. 2 to the Fifth Amended and Restated Advisory Agreement, dated as of August 16, 2021, by and
among Braemar Hotels & Resorts Inc., Braemar Hospitality Limited Partnership, Braemar TRS Corporation,
Ashford Inc. and Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 10.1 of the Company’s
Form 8-K filed on August 17, 2021) (File No. 001-35972)
Right of First Offer Agreement between Ashford Hospitality Trust, Inc. and Ashford Hospitality Prime, Inc.,
dated November 19, 2013 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on
November 25, 2013) (File No. 001-35972)
Amended and Restated Ashford Hospitality Prime, Inc. 2013 Equity Incentive Plan, dated November 5, 2013
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 12, 2013) (File
No. 001-35972)
Ashford Hospitality Prime, Inc. Advisor Equity Incentive Plan (incorporated by reference to Exhibit 10.5 of the
Registration Statement on Form S-11 filed on December 19, 2013) (File No. 001-35972)
Option Agreement Pier House Resort & Spa by and between Ashford Hospitality Prime Limited Partnership and
Ashford Hospitality Limited Partnership with respect to the Properties Entities, and Ashford TRS Corporation
and Ashford Prime TRS Corporation with respect to the TRS Entity, dated November 19, 2013 (incorporated by
reference to Exhibit 10.4 to the Current Report on Form 8-K filed on November 25, 2013) (File No. 001-35972)
164
10.7
10.7.1
10.8
10.8.1
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18†
10.18.1†
10.19†
10.20†
10.21†
10.22†
Amended and Restated Braemar Mutual Exclusivity Agreement, dated August 8, 2018, by and among Braemar
Hospitality Limited Partnership, Braemar Hotels & Resorts, Inc., Remington Lodging & Hospitality, LLC, as
consented to by Monty J. Bennett (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K
filed August 14, 2018) (File No. 001-35972)
Braemar Mutual Exclusivity Agreement, dated August 8, 2018, by and among Braemar Hospitality Limited
Partnership, Braemar Hotels & Resorts, Inc. and Project Management LLC (incorporated by reference to Exhibit
10.4 of the Current Report on Form 8-K filed August 14, 2018) (File No. 001-35972)
Amended and Restated Braemar Hotel Master Management Agreement, dated August 8, 2018, by and among
Braemar TRS Corporation, CHH III Tenant Parent Corp., RC Hotels (Virgin Islands), Inc. and Remington
Lodging & Hospitality, LLC (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed
August 14, 2018) (File No. 001-35972)
Braemar Master Project Management Agreement, dated August 8, 2018, by and among Braemar TRS
Corporation, CHH III Tenant Parent Corp., RC Hotels (Virgin Islands), Inc., Braemar Hospitality Limited
Partnership and Project Management LLC (incorporated by reference to Exhibit 10.2 of the Current Report on
Form 8-K filed August 14, 2018) (File No. 001-35972)
Registration Rights Agreement by and between Ashford Hospitality Prime, Inc., Ashford Hospitality Limited
Partnership and Ashford Hospitality Advisors LLC, dated November 19, 2013 (incorporated by reference to
Exhibit 10.8 to the Current Report on Form 8-K filed on November 25, 2013) (File No. 001-35972)
Registration Rights Agreement between Ashford Hospitality Prime, Inc., for the benefit of the holders of common
partnership units in Ashford Hospitality Prime Limited Partnership named therein, dated November 19, 2013
(incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on November 25, 2013) (File
No. 001-35972)
Schedule of Agreements omitted pursuant to Instruction 2 to Item 601 of Regulation S-K (incorporated by
reference to Exhibit 10.13a to Amendment No. 3 to the Registration Statement on Form 10 filed on September
24, 2013) (File No. 001-35972)
Licensing Agreement between Ashford Hospitality Trust, Inc., Ashford Hospitality Prime, Inc. and Ashford
Hospitality Prime Limited Partnership, dated November 19, 2013 (incorporated by reference to Exhibit 10.10 to
the Current Report on Form 8-K filed on November 25, 2013) (File No. 001-35972)
Loan Agreement, dated as of March 9, 2015, among Ashford Pier House LP, Ashford TRS Pier House LLC, and
Credit Agricole Corporate and Investment Bank (incorporated by reference to Exhibit 10.33 to the Annual Report
on Form 10-K filed on March 16, 2015) (File No. 001-35972)
Recourse Liability Agreement, dated as of March 9, 2015, made by Ashford Pier House LP, Ashford TRS Pier
House LLC, and Ashford Hospitality Prime Limited Partnership for the benefit of Credit Agricole Corporate and
Investment Bank (incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K filed on March
16, 2015) (File No. 001-35972)
Environmental Indemnity, dated as of March 9, 2015, made by Ashford Pier House LP, Ashford TRS Pier House
LLC, and Ashford Hospitality Prime Limited Partnership for the benefit of Credit Agricole Corporate and
Investment Bank (incorporated by reference to Exhibit 10.35 to the Annual Report on Form 10-K filed on March
16, 2015) (File No. 001-35972)
Letter Agreement, dated September 17, 2015, by and between Ashford Hospitality Prime, Inc. and Ashford Inc.
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 18, 2015) (File
No. 001-35972)
Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of Ashford Hospitality
Prime Limited Partnership (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on
April 8, 2016) (File No. 001-35972)
Second Amended and Restated 2013 Equity Incentive Plan of Ashford Hospitality Prime, Inc. (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 9, 2016) (File No. 001-35972)
Amendment Number One to the Second Amended and Restated 2013 Equity Incentive Plan of Ashford
Hospitality Prime, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on
June 15, 2017 (File No. 001-35972)
Amended and Restated Form of Performance Stock Unit Award Agreement (filed as Exhibit 10.43 to the Annual
Report on Form 10-K filed on February 28, 2017) (File No. 001-35972)
Amended and Restated Form of Performance LTIP Unit Award Agreement (filed as Exhibit 10.44 to the Annual
Report on Form 10-K filed on February 28, 2017 (File No. 001-35972)
Form of 2021 Performance LTIP Unit Award Agreement (filed as Exhibit 10.7 to the Quarterly Report on Form
10-Q filed on May 7, 2021) (File No. 001-35972)
Form of 2021 Performance Stock Unit Award Agreement (filed as Exhibit 10.6 to the Quarterly Report on Form
10-Q filed on May 7, 2021) (File No. 001-35972)
165
10.23†
10.24†
10.25
10.25.1
10.25.2
10.25.3
10.26
10.27
10.27.1
10.27.2
10.28
10.28.1
10.29
10.30
10.31
10.32
Restricted Stock Award Agreement, dated as of November 2, 2016, by and between Ashford Hospitality Prime,
Inc. and Richard J. Stockton (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
on November 2, 2016) (File No. 001-35972)
Employment Agreement, dated as of November 2, 2016, by and among Ashford Inc., Ashford Hospitality
Advisors, LLC and Richard J. Stockton (incorporated by reference to Exhibit 10.2 to the Current Report on Form
8-K filed on November 2, 2016) (File No. 001-35972)
Amended and Restated Credit Agreement, dated as of November 10, 2016, by and among Ashford Hospitality
Prime Limited Partnership, Ashford Hospitality Prime, Inc., Bank of America, N.A. and the other lenders party
thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 17,
2016) (File No. 001-35972)
Second Amended and Restated Credit Agreement, dated as of October 25, 2019, by and among Braemar Hotels
& Resorts Inc., Braemar Hospitality Limited Partnership, Bank of America, N.A. and the other lenders party
thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 28, 2019)
(File No. 001-35972)
First Amendment to Second Amended and Restated Credit Agreement, dated June 8, 2020 (incorporated by
reference to Exhibit 10.1 of Form 8-K filed June 11, 2020)
Second Amendment to Second Amended and Restated Credit Agreement, dated February 22, 2021.(incorporated
by reference to Exhibit 10.1 of Form 8-K filed February 22, 2021) (File No. 001-35972)
Form of Indemnification Agreement between Ashford Hospitality Prime, Inc. and each of its executive officers
and directors (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 8,
2017) (File No. 001-35972)
Agreement of Purchase and Sale, dated January 13, 2017 between Ashford Hospitality Prime Limited
Partnership, a Delaware limited partnership and Hotel Yountville, LLC a California limited liability company,
Hotel Yountville Holdings, LLC, a California limited liability company, Altamura Family, LLC, a California
limited liability company, and George Altamura, Jr., LLC, a California limited liability company (incorporated by
reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q filed on May 9, 2017) (File No. 001-35972)
First Amendment of Agreement of Purchase and Sale, dated January 30, 2017, between Hotel Yountville, LLC, a
California limited liability company, Hotel Yountville Holdings, LLC, a California limited liability company,
Altamura Family, LLC, a California limited liability company, and George Altamura, Jr., LLC, a California
limited liability company and Ashford Hospitality Prime Limited Partnership, a Delaware limited partnership
(incorporated by reference to Exhibit 10.1.1 of the Quarterly Report on Form 10-Q filed on May 9, 2017) (File
No. 001-35972)
Second Amendment of Agreement of Purchase and Sale, dated February 28, 2017, by and among Hotel
Yountville, LLC, a California limited liability company, Hotel Yountville Holdings, LLC, a California limited
liability company, Altamura Family, LLC, a California limited liability company, and George Altamura, Jr., LLC,
a California limited liability company and Ashford Hospitality Prime Limited Partnership, a Delaware limited
partnership (incorporated by reference to Exhibit 10.1.2 of the Quarterly Report on Form 10-Q filed on May 9,
2017) (File No. 001-35972)
Sale and Purchase Agreement, dated March 9, 2017, by and between, WTCC Beaver Creek Investors V, L.L.C., a
Delaware limited liability company, and Ashford Hospitality Prime Limited Partnership, a Delaware limited
partnership (incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q filed on May 9,
2017) (File No. 001-35972)
First Amendment To Sale and Purchase Agreement, dated March 13, 2017, by and between WTCC Beaver Creek
Investors V, L.L.C., a Delaware limited liability company, and Ashford Hospitality Prime Limited Partnership, a
Delaware limited partnership (incorporated by reference to Exhibit 10.2.1 of the Quarterly Report on Form 10-Q
filed on May 9, 2017) (File No. 001-35972)
Form of Director Confidentiality Agreement (incorporated by reference to Exhibit 10.1 of the Current Report on
Form 8-K filed on July 7, 2017 (File No. 001-35972)
Amended and Restated Employment Agreement, dated as of April 30, 2019, by and among Ashford Inc., Ashford
Hospitality Advisors, LLC, and Richard J. Stockton (incorporated by reference to Exhibit 10.28 to the Annual
Report on Form 10-K/A filed on April 30, 2019) (File No. 001-35972)
Second Amended and Restated Credit Agreement, dated as of October 25, 2019, by and among Braemar Hotels
& Resorts Inc., Braemar Hospitality Limited Partnership, Bank of America, N.A. and the other lenders party
thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 28, 2019)
(File No. 001-35972)
Standby Equity Distribution Agreement, dated as of February 4, 2021, by and between Braemar Hotels & Resorts
Inc. and YA II PN. Ltd. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on
February 4, 2021) (File No. 001-35972)
166
10.33
10.34
10.35
10.36
10.37
10.38*
10.39*
21.1*
21.2*
23.1*
23.2*
31.1*
31.2*
32.1**
32.2**
99.1
Purchase Agreement, dated as of April 21, 2021, by and between the Company and Lincoln Park Capital Fund,
LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 21, 2021) (File
No. 001-35972)
Purchase Agreement, dated as of May 13, 2021, by and among the Company, the Operating Partnership, the
Advisor and UBS Securities LLC, as the Initial Purchaser. (incorporated by reference to Exhibit 1.1 to the Current
Report on Form 8-K filed on May 18, 2021) (File No. 001-35972)
Equity Distribution Agreement, dated as of May 25, 2021, by and between Braemar Hotels & Resorts Inc. and
Virtu Americas LLC (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K filed on May
26, 2021)
Equity Distribution Agreement, dated as of July 12, 2021, by and among Braemar Hotels & Resorts Inc., Braemar
Hospitality Limited Partnership, Ashford Hospitality Advisors LLC and Virtu Americas LLC (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 12, 2021)
Amendment No. 1 to the Braemar Master Project Management Agreement (filed as Exhibit 10.5 to the Quarterly
Report on Form 10-Q filed on August 6, 2021) (File No. 001-35972)
Purchase and Sale Agreement, dated as of December 24, 2021, between and among DBR Hotel Owner LLC, as
seller, and Braemar Hotels & Resorts Inc. and BHR Dorado LLC, as purchaser
Limited Waiver Under Advisory Agreement, dated as of March 10, 2022, by and among Braemar Hotels &
Resorts Inc., Braemar Hospitality Limited Partnership, Braemar TRS Corporation, Ashford Inc. and Ashford
Hospitality Advisors LLC.
List of Subsidiaries of Braemar Hotels & Resorts Inc.
List of Special Purpose Entities of Braemar Hotels & Resorts Inc.
Consent of BDO USA, LLP
Consent of Robert A. Stanger & Co., Inc.
Certification of the Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934,
as amended
Certification of the Chief Financial Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended
Certification of the Chief Executive Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934,
as amended (In accordance with SEC Release 33-8212, this exhibit is being furnished, and is not being filed as
part of this report or as a separate disclosure document, and is not being incorporated by reference into any
Securities Act of 1933 registration statement.)
Certification of the Chief Financial Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as
amended (In accordance with SEC Release 33-8212, this exhibit is being furnished, and is not being filed as part
of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities
Act of 1933 registration statement.)
Consulting and Cooperation Agreement, by and among Ashford Inc., Ashford Hospitality Advisors LLC, and
Robert G. Haiman, dated as of June 30, 2021 (incorporated by reference to Exhibit 99.1 to the Current Report on
Form 8-K filed on June 30, 2021).
_________________________
* Filed herewith.
** Furnished herewith
† Management contract or compensatory plan or arrangement.
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 are
formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements
of Operations; (iii) Consolidated Statements Comprehensive Income (Loss); (iv) Consolidated Statements of Equity;(v)
Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements. In accordance with Rule 402 of
Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be
“filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part
of any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such filing.
167
101.INS
XBRL Instance Document - the instance document does not appear
in the Interactive Data File because its XBRL tags are embedded
within the XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL
101.DEF
101.LAB
101.PRE
104
Inline XBRL Taxonomy Calculation Linkbase Document.
Inline XBRL Taxonomy Extension Definition Linkbase Document.
Inline XBRL Taxonomy Label Linkbase Document.
Inline XBRL Taxonomy Presentation Linkbase Document.
Cover Page Interactive Data File (formatted in Inline XBRL and
contained in Exhibit 101)
Submitted electronically with this report.
Submitted electronically with this report.
Submitted electronically with this report.
Submitted electronically with this report.
Submitted electronically with this report.
Item 16. Form 10-K Summary
None.
168
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 10, 2022.
SIGNATURES
BRAEMAR HOTELS & RESORTS INC.
By: /s/ RICHARD J. STOCKTON
Richard J. Stockton
President and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed
below on behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ MONTY J. BENNETT
Monty J. Bennett
/s/ RICHARD J. STOCKTON
Richard J. Stockton
/s/ DERIC S. EUBANKS
Deric S. Eubanks
/s/ MARK L. NUNNELEY
Mark L. Nunneley
/s/ STEFANI D. CARTER
Stefani D. Carter
/s/ CURTIS B. MCWILLIAMS
Curtis B. McWilliams
/s/ MATTHEW D. RINALDI
Matthew D. Rinaldi
/s/ KENNETH H. FEARN, JR.
Kenneth H. Fearn, Jr.
/s/ ABTEEN VAZIRI
Abteen Vaziri
/s/ MARY CANDACE EVANS
Mary Candace Evans
Chairman of the Board of Directors
March 10, 2022
President and Chief Executive Officer
(Principal Executive Officer)
March 10, 2022
Chief Financial Officer
(Principal Financial Officer)
March 10, 2022
Chief Accounting Officer
(Principal Accounting Officer)
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
Director
Director
Director
Director
Director
Director
169
I
I
I
E
L
U
D
E
H
C
S
S
E
I
R
A
I
D
I
S
B
U
S
D
N
A
.
C
N
I
S
T
R
O
S
E
R
&
S
L
E
T
O
H
R
A
M
E
A
R
B
N
O
I
T
A
I
C
E
R
P
E
D
D
E
T
A
L
U
M
U
C
C
A
D
N
A
E
T
A
T
S
E
L
A
E
R
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
)
s
d
n
a
s
u
o
h
t
n
i
(
I
n
m
u
l
o
C
H
n
m
u
l
o
C
G
n
m
u
l
o
C
F
n
m
u
l
o
C
E
n
m
u
l
o
C
D
n
m
u
l
o
C
C
n
m
u
l
o
C
B
n
m
u
l
o
C
A
n
m
u
l
o
C
e
m
o
c
n
I
t
n
e
m
e
t
a
t
S
e
t
a
D
e
t
a
D
n
o
i
t
i
s
i
u
q
c
A
n
o
i
t
c
u
r
t
s
n
o
C
d
e
t
a
l
u
m
u
c
c
A
n
o
i
t
a
i
c
e
r
p
e
D
l
a
t
o
T
,
E
&
F
F
d
n
a
s
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
i
d
n
a
L
,
E
&
F
F
d
n
a
s
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
i
d
n
a
L
,
E
&
F
F
d
n
a
s
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
i
t
n
u
o
m
A
g
n
i
y
r
r
a
C
s
s
o
r
G
d
o
i
r
e
P
f
o
e
s
o
l
C
t
A
d
e
z
i
l
a
t
i
p
a
C
s
t
s
o
C
n
o
i
t
i
s
i
u
q
c
A
e
c
n
i
S
t
s
o
C
l
a
i
t
i
n
I
d
n
a
L
s
e
c
n
a
r
b
m
u
c
n
E
n
o
i
t
a
c
o
L
y
t
r
e
p
o
r
P
l
e
t
o
H
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
)
3
(
,
)
2
(
,
)
1
(
7
0
0
2
/
4
0
7
0
0
2
/
4
0
7
0
0
2
/
4
0
7
0
0
2
/
4
0
7
0
0
2
/
4
0
4
1
0
2
/
2
0
4
1
0
2
/
3
0
5
1
0
2
/
7
0
7
1
0
2
/
5
0
7
1
0
2
/
3
0
8
1
0
2
/
4
0
5
1
0
2
/
2
1
9
1
0
2
/
1
0
1
2
0
2
/
8
0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9
9
9
,
4
6
7
4
0
,
1
5
7
4
5
,
5
4
5
5
6
,
2
5
3
3
3
,
9
5
9
9
5
,
9
3
9
8
8
,
1
1
1
3
8
,
2
1
2
4
8
,
0
1
1
3
4
,
3
1
7
9
8
,
1
1
7
5
3
,
6
1
2
7
9
2
8
0
,
8
8
3
8
,
2
2
1
0
5
5
,
6
5
1
3
6
1
,
7
3
1
0
5
0
,
6
5
1
0
8
4
,
4
6
1
0
7
1
,
7
9
4
4
2
,
6
6
9
8
6
,
6
9
9
4
1
,
1
5
1
8
1
5
,
4
7
1
1
7
4
,
0
4
1
5
9
7
,
0
2
1
9
5
5
,
4
7
8
3
8
,
2
2
1
2
6
6
,
4
2
1
9
4
3
,
7
2
1
7
9
3
,
3
3
1
9
4
8
,
1
5
1
9
3
4
,
7
3
4
4
2
,
6
6
0
4
8
,
8
4
2
3
0
,
2
6
8
8
8
,
0
9
8
3
9
,
4
1
1
4
6
0
,
4
9
3
1
2
,
5
4
—
8
8
8
,
1
3
4
1
8
,
9
3
5
6
,
2
2
1
3
6
,
2
1
1
3
7
,
9
5
—
9
4
8
,
7
4
7
1
1
,
9
8
0
3
6
,
3
8
3
3
5
,
5
2
1
3
7
,
6
2
6
4
3
,
9
2
4
2
2
,
8
6
8
4
,
2
1
0
2
3
,
3
3
6
6
6
,
0
6
0
8
4
,
1
1
8
2
4
,
4
0
6
0
,
2
3
7
2
9
4
6
,
5
)
4
9
8
,
8
(
1
7
4
,
6
7
6
3
1
1
6
4
,
2
$
2
0
4
,
6
8
1
$
1
8
6
,
0
4
1
$
1
2
7
,
5
4
$
6
3
4
,
4
3
$
1
8
4
,
9
9
3
$
8
7
0
,
5
4
8
,
1
$
4
3
4
,
0
6
3
,
1
$
4
4
6
,
4
8
4
$
6
9
1
,
3
4
2
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4
1
6
,
4
1
1
6
7
1
,
2
1
1
9
2
0
,
4
9
1
3
7
,
2
7
9
6
3
,
0
4
1
1
1
0
,
3
3
4
8
1
,
4
6
7
6
5
,
8
4
3
8
3
,
6
5
2
8
7
,
9
9
7
6
4
,
8
3
3
0
6
,
1
9
7
7
0
,
5
4
—
8
8
8
,
1
3
4
1
8
,
9
3
5
6
,
2
2
1
3
6
,
2
1
1
3
7
,
9
5
—
9
4
8
,
7
4
7
1
1
,
9
8
0
3
6
,
3
8
3
3
5
,
5
2
1
3
7
,
6
2
6
4
3
,
9
2
0
0
0
,
8
8
0
0
7
,
4
3
1
0
0
6
,
4
8
0
0
3
,
6
1
1
0
0
4
,
9
9
0
0
0
,
0
8
0
0
0
,
0
4
0
0
0
,
1
5
0
0
5
,
7
6
0
0
5
,
9
9
0
0
5
,
2
4
0
0
0
,
4
5
0
0
0
,
0
3
$
5
4
2
,
6
0
1
$
1
2
7
,
5
4
$
0
0
0
,
7
0
1
$
$
8
3
2
,
7
1
1
,
1
$
4
4
6
,
4
8
4
$
0
0
5
,
4
9
0
,
1
$
.
.
C
D
,
n
o
t
g
n
i
h
s
a
W
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
t
l
i
H
l
a
t
i
p
a
C
A
C
,
a
l
l
o
J
a
L
.
.
.
.
.
.
.
.
s
e
n
i
P
y
e
r
r
o
T
a
l
l
o
J
a
L
n
o
t
l
i
H
A
W
,
e
l
t
t
a
e
S
.
.
.
.
.
.
.
.
.
.
t
n
o
r
f
r
e
t
a
W
e
l
t
t
a
e
S
t
t
o
i
r
r
a
M
A
C
,
o
c
s
i
c
n
a
r
F
n
a
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
y
c
n
a
l
C
e
h
T
A
P
,
a
i
h
p
l
e
d
a
l
i
h
P
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
l
e
t
o
H
y
r
a
t
o
N
e
h
T
L
F
,
t
s
e
W
y
e
K
.
.
.
.
.
.
.
.
.
.
.
.
.
.
a
p
S
&
t
r
o
s
e
R
e
s
u
o
H
r
e
i
P
A
C
,
e
l
l
i
v
t
n
u
o
Y
.
.
.
.
.
.
.
.
.
.
.
.
a
p
S
d
n
a
l
e
t
o
H
o
n
o
s
s
e
d
r
a
B
A
C
,
e
l
l
i
v
t
n
u
o
Y
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
l
l
i
v
t
n
u
o
Y
l
e
t
o
H
L
I
,
o
g
a
c
i
h
C
e
l
i
M
t
n
e
c
i
f
i
n
g
a
M
o
g
a
c
i
h
C
l
e
t
i
f
o
S
O
C
,
k
e
e
r
C
r
e
v
a
e
B
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
a
p
S
&
t
r
o
s
e
R
k
e
e
r
C
r
e
v
a
e
B
t
t
a
y
H
k
r
a
P
L
F
,
a
t
o
s
a
r
a
S
.
.
.
.
.
.
.
.
.
.
.
.
a
t
o
s
a
r
a
S
n
o
t
l
r
a
C
-
z
t
i
R
e
h
T
I
V
S
U
,
s
a
m
o
h
T
.
t
S
.
.
.
.
.
.
.
.
s
a
m
o
h
T
.
t
S
n
o
t
l
r
a
C
-
z
t
i
R
e
h
T
A
C
,
s
l
l
i
H
y
l
r
e
v
e
B
.
.
.
.
.
.
.
.
.
.
.
.
l
e
t
o
H
s
l
l
i
H
y
l
r
e
v
e
B
C
.
r
M
A
C
,
e
e
k
c
u
r
T
.
.
.
.
.
.
.
e
o
h
a
T
e
k
a
L
n
o
t
l
r
a
C
-
z
t
i
R
e
h
T
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
l
a
t
o
T
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
170
.
s
r
a
e
y
5
o
t
5
.
1
s
i
s
e
r
u
t
x
i
f
d
n
a
e
r
u
t
i
n
r
u
f
r
o
f
e
f
i
l
l
u
f
e
s
u
d
e
t
a
m
i
t
s
E
.
s
r
a
e
y
5
.
7
s
i
s
t
n
e
m
e
v
o
r
p
m
i
g
n
i
d
l
i
u
b
r
o
f
e
f
i
l
l
u
f
e
s
u
d
e
t
a
m
i
t
s
E
.
s
r
a
e
y
9
3
s
i
s
g
n
i
d
l
i
u
b
r
o
f
e
f
i
l
l
u
f
e
s
u
d
e
t
a
m
i
t
s
E
)
1
(
)
2
(
)
3
(
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
E
r
a
e
Y
9
1
0
2
0
2
0
2
1
2
0
2
6
0
8
,
2
6
5
,
1
$
4
7
1
,
1
9
7
,
1
$
9
4
8
,
4
8
7
,
1
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
c
n
a
l
a
b
g
n
i
n
n
i
g
e
B
1
4
5
,
2
6
2
)
5
4
4
,
4
1
(
)
6
7
4
(
)
2
5
2
,
9
1
(
—
—
7
6
0
,
6
1
)
2
9
3
,
2
2
(
3
6
6
,
5
9
)
7
7
6
,
2
3
(
—
)
7
5
7
,
2
(
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
n
o
i
t
i
d
d
A
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
f
f
o
-
e
t
i
r
W
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
n
e
m
r
i
a
p
m
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
l
a
s
o
p
s
i
d
/
s
e
l
a
S
4
7
1
,
1
9
7
,
1
$
9
4
8
,
4
8
7
,
1
$
8
7
0
,
5
4
8
,
1
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
c
n
a
l
a
b
g
n
i
d
n
E
5
0
9
,
2
6
2
5
9
1
,
9
6
)
5
0
1
(
)
5
4
4
,
4
1
(
)
8
9
7
,
7
(
2
5
7
,
9
0
3
2
2
4
,
1
8
4
,
1
—
2
5
7
,
9
0
3
9
9
8
,
2
7
)
2
9
3
,
2
2
(
—
$
$
9
5
2
,
0
6
3
0
9
5
,
4
2
4
,
1
$
$
—
9
5
2
,
0
6
3
4
5
0
,
3
7
)
7
7
6
,
2
3
(
)
5
5
1
,
1
(
1
8
4
,
9
9
3
7
9
5
,
5
4
4
,
1
$
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
c
n
a
l
a
b
g
n
i
n
n
i
g
e
B
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
s
n
e
p
x
e
n
o
i
t
a
i
c
e
r
p
e
D
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
n
e
m
r
i
a
p
m
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
f
f
o
-
e
t
i
r
W
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
l
a
s
o
p
s
i
d
/
s
e
l
a
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
c
n
a
l
a
b
g
n
i
d
n
E
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
:
n
o
i
t
a
i
c
e
r
p
e
d
d
e
t
a
l
u
m
u
c
c
A
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
e
n
,
e
t
a
t
s
e
l
a
e
r
n
i
t
n
e
m
t
s
e
v
n
I
:
e
t
a
t
s
e
l
a
e
r
n
i
t
n
e
m
t
s
e
v
n
I
171
Gallery
Officers and Directors
Officers and Directors
Corporate Information
Corporate Information
The Ritz-Carlton Lake Tahoe
Truckee, CA
Pier House Resort
Key West, FL
The Notary Hotel
Philadelphia, PA
The Capital Hilton
Washington, DC
Hotel Yountville
Yountville, CA
Bardessono Hotel and Spa
Yountville, CA
The Ritz-Carlton Reserve Dorado Beach
Dorado, Puerto Rico
The Ritz-Carlton Sarasota
Sarasota, FL
Sofitel Chicago Magnificent Mile
Chicago, IL
The Clancy
San Francisco, CA
Mr. C Beverly Hills
Beverly Hills, CA
Park Hyatt Beaver Creek
Beaver Creek, CO
The Ritz-Carlton St. Thomas
St. Thomas, USVI
Marriott Seattle
Seattle, WA
Hilton La Jolla Torrey Pines
La Jolla, CA
OFFICERS
OFFICERS
Richard J. Stockton
Richard J. Stockton
Chief Executive Officer
Chief Executive Officer
& President
& President
Deric S. Eubanks
Deric S. Eubanks
Chief Financial Officer and Treasurer
Chief Financial Officer and Treasurer
Mark L. Nunneley
Mark L. Nunneley
Chief Accounting Officer
Chief Accounting Officer
J. Robison Hays III
Jeremy J. Welter
Chief Strategy Officer
Chief Operating Officer
Jeremy J. Welter
Alex Rose
Chief Operating Officer
Executive Vice President,
General Counsel & Secretary
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Monty J. Bennett
Monty J. Bennett
Chairman of the Board
Chairman of the Board
Stefani D. Carter
Stefani D. Carter
Senior Counsel
Litigation Shareholder
Estes Thorne & Carr PLLC
Ferguson Braswell Fraser Kubasta PC
Kenneth H. Fearn
Mary C. Evans
Managing Partner
Founder & Publisher
Integrated Capital
CandysDirt.com & SecondShelters.com
Curtis B. McWilliams
Kenneth H. Fearn JR.
President & CEO
Managing Partner
CNL Real Estate Advisors, Inc (Retired)
Integrated Capital
Matthew D. Rinaldi
General Counsel
Curtis B. McWilliams
Quantas Healthcare Management
Interim CEO
Kalera Inc
Abteen Vaziri
Managing Director
Matthew D. Rinaldi
Brevet Capital Management
General Counsel
Quantas Healthcare Management
Richard J. Stockton
Chief Executive Officer
& President
Abteen Vaziri
Managing Director
Brevet Capital Management
Annual Meeting
Annual Meeting
The annual meeting of shareholders will be
The annual meeting of shareholders will be
held on July 3, 2018, at 9:00 a.m. (local
held on May 11, 2022, at 9:00 a.m. CT
time) at the Dallas/Fort Worth Airport Marriott
at the Renaissance Nashville Hotel
8440 Freeport Parkway Irving, TX 75063
611 Commerce Street, Nashville, TN 37203
Shareholders of record as of the close
Shareholders of record as of the close of
of business on May 15, 2018 will be
business on March 11, 2022 will be
entitled to vote at this meeting.
entitled to vote at this meeting.
Corporate Office
Corporate Office
Ashford Hospitality Prime, Inc.
Braemar Hotels & Resorts Inc.
14185 Dallas Parkway, Suite 1100
14185 Dallas Parkway, Suite 1200
Dallas, Texas 75254
Dallas, Texas 75254
Telephone: (972) 490-9600
Telephone: (972) 490-9600
www.ahpreit.com
www.bhrreit.com
Registrar and Transfer Agent
Registrar and Transfer Agent
Computershare Trust Company, N.A.
Computershare Trust Company, N.A.
Canton, Massachusetts
Canton, Massachusetts
Independent Auditors
Independent Auditors
BDO USA, LLP
BDO USA, LLP
Dallas, Texas
Dallas, Texas
Legal Counsel
Legal Counsel
Hunton Andrews Kurth, LLP
Cadwalader, Wickersham & Taft, LLP
Dallas, Texas
New York, New York
Annual Report on Form
Annual Report on Form
10-K/Investor Contact
10-K/Investor Contact
A copy of the Ashford Hospitality Prime Annual
A copy of the Braemar Hotels & Resorts Annual
Report on Form 10-K for fiscal 2017, was filed
Report on Form 10-K for fiscal 2021, was filed
with the Securities and Exchange Commission
with the Securities and Exchange Commission
on March 8, 2019 is included with this
on March 10, 2022 is included with this report.
report. Additional copies of the report and
Additional copies of the report and copies of
copies of the exhibits referenced therein are
the exhibits referenced therein are available
available from the Company. Requests for
from the Company. Requests for these items
these items and other investor contacts should
and other investor contacts should be directed
be directed to Joseph Calabrese of Financial
to Joseph Calabrese of Financial Relations
Relations Board at (212) 827-3772.
Board at (212) 827-3772.
Forward-Looking Statements
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the federal securities
This report contains forward-looking statements within the meaning of the federal securities
laws. Ashford Hospitality Prime, Inc. (the “Company” or “we” or “our”) cautions investors that
laws. Braemar Hotels & Resorts, Inc (the “Company” or “we” or “our”) cautions investors that
any forward-looking statements presented herein, or which management may make orally or
any forward-looking statements presented herein, or which management may make orally or
in writing from time to time, are based on management’s beliefs and assumptions at that time.
in writing from time to time, are based on management’s beliefs and assumptions at that time.
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,”
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
“might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions,
which do not relate solely to historical matters, are intended to identify forward-looking
which do not relate solely to historical matters, are intended to identify forward-looking
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
statements. Such statements are subject to risks, uncertainties, and assumptions and are not
guarantees of future performance, which may be affected by known and unknown risks, trends,
guarantees of future performance, which may be affected by known and unknown risks, trends,
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated, or projected. We caution investors that while forward-looking
from those anticipated, estimated, or projected. We caution investors that while forward-looking
statements reflect our good faith beliefs at the time they are made, such statements
statements reflect our good faith beliefs at the time they are made, such statements
are not guarantees of future performance and are impacted by actual events that occur after
are not guarantees of future performance and are impacted by actual events that occur after
such statements are made. We expressly disclaim any responsibility to update forward-looking
such statements are made. We expressly disclaim any responsibility to update forward-looking
statements, whether as a result of new information, future events, or otherwise. Accordingly,
statements, whether as a result of new information, future events, or otherwise. Accordingly,
investors should use caution in relying on past forward-looking statements, which are based on
investors should use caution in relying on past forward-looking statements, which are based on
results and trends at the time they are made, to anticipate future results or trends.
results and trends at the time they are made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results, performance, or
Some of the risks and uncertainties that may cause our actual results, performance, or
achievements to differ materially from those expressed or implied by forward-looking statements
achievements to differ materially from those expressed or implied by forward-looking statements
include, among others, those discussed in our Annual Report on Form 10-K under the heading
include, among others, those discussed in our Annual Report on Form 10-K under the heading
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
“Risk Factors.” These risks and uncertainties continue to be relevant to our performance and
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
financial condition. Moreover, we operate in a very competitive and rapidly changing environment
where new risk factors emerge from time to time. It is not possible for management to predict all
where new risk factors emerge from time to time. It is not possible for management to predict all
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
such risk factors, nor can it assess the impact of all such risk factors on our business or the extent
to which any factor, or combination of factors, may cause actual results to differ materially from
to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Given these risks and uncertainties, investors
those contained in any forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction of actual results.
should not place undue reliance on forward-looking statements as a prediction of actual results.
Braemar Hotels and Resorts Cover 3-29-22.indd 2
Braemar Hotels and Resorts Cover 3-29-22.indd 2
3/29/22 1:50 PM
3/29/22 1:50 PM
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Dear Fellow Shareholder,
Reflecting on the prior year, the introduction and
Reflecting on the prior year, the introduction and
Reflecting on the prior year, the introduction and
At the same time, we wanted to ensure the
At the same time, we wanted to ensure the
At the same time, we wanted to ensure the
rollout of a global vaccine program towards the
rollout of a global vaccine program towards the
rollout of a global vaccine program towards the
company did not miss any acquisition opportunities
company did not miss any acquisition opportunities
company did not miss any acquisition opportunities
end of 2020 and the beginning of 2021 dramatically
end of 2020 and the beginning of 2021 dramatically
end of 2020 and the beginning of 2021 dramatically
arising out of the stress to the industry. During the
arising out of the stress to the industry. During the
arising out of the stress to the industry. During the
altered people’s personal and business lives.
altered people’s personal and business lives.
altered people’s personal and business lives.
year, we continued to see a meaningful uptick in
year, we continued to see a meaningful uptick in
year, we continued to see a meaningful uptick in
It afforded an opportunity to move to a new
It afforded an opportunity to move to a new
It afforded an opportunity to move to a new
acquisition opportunities but remained extremely
acquisition opportunities but remained extremely
acquisition opportunities but remained extremely
normal of increased socialization as government-
normal of increased socialization as government-
normal of increased socialization as government-
disciplined in our investment approach by only
disciplined in our investment approach by only
disciplined in our investment approach by only
mandated lockdowns were gradually suspended
mandated lockdowns were gradually suspended
mandated lockdowns were gradually suspended
focusing on transactions that would be accretive
focusing on transactions that would be accretive
focusing on transactions that would be accretive
and instead replaced with vaccination and testing
and instead replaced with vaccination and testing
and instead replaced with vaccination and testing
to total shareholder return.
to total shareholder return.
to total shareholder return.
mandates on the local and federal levels. The year
mandates on the local and federal levels. The year
mandates on the local and federal levels. The year
also introduced a new reality in terms of ways of
also introduced a new reality in terms of ways of
also introduced a new reality in terms of ways of
To that end, we acquired the Mr. C Beverly Hills
To that end, we acquired the Mr. C Beverly Hills
To that end, we acquired the Mr. C Beverly Hills
working, living, and socializing. It allowed us to
working, living, and socializing. It allowed us to
working, living, and socializing. It allowed us to
Hotel, an irreplaceable luxury property in a
Hotel, an irreplaceable luxury property in a
Hotel, an irreplaceable luxury property in a
return to some sense of normalcy in our work and
return to some sense of normalcy in our work and
return to some sense of normalcy in our work and
premier location in the heart of West Los Angeles.
premier location in the heart of West Los Angeles.
premier location in the heart of West Los Angeles.
personal lives, although still on a limited basis.
personal lives, although still on a limited basis.
personal lives, although still on a limited basis.
We also announced the acquisition of the Dorado
We also announced the acquisition of the Dorado
We also announced the acquisition of the Dorado
Further, massive amounts of stimulus flooded our
Further, massive amounts of stimulus flooded our
Further, massive amounts of stimulus flooded our
Beach, a Ritz-Carlton Reserve in Dorado, Puerto
Beach, a Ritz-Carlton Reserve in Dorado, Puerto
Beach, a Ritz-Carlton Reserve in Dorado, Puerto
economy, generally providing extensive liquidity
economy, generally providing extensive liquidity
economy, generally providing extensive liquidity
Rico, one of the most iconic luxury assets in the
Rico, one of the most iconic luxury assets in the
Rico, one of the most iconic luxury assets in the
to consumers and badly-affected businesses.
to consumers and badly-affected businesses.
to consumers and badly-affected businesses.
Americas. Both transactions fit nicely into our
Americas. Both transactions fit nicely into our
Americas. Both transactions fit nicely into our
diversified portfolio and were consummated at
diversified portfolio and were consummated at
diversified portfolio and were consummated at
As a result of both the stimulus funding and
As a result of both the stimulus funding and
As a result of both the stimulus funding and
attractive pricing in the midst of a longer-term
attractive pricing in the midst of a longer-term
attractive pricing in the midst of a longer-term
remote working trends, travel patterns changed
remote working trends, travel patterns changed
remote working trends, travel patterns changed
recovery trend.
recovery trend.
recovery trend.
dramatically. Individuals increased their amount
dramatically. Individuals increased their amount
dramatically. Individuals increased their amount
of leisure travel to resorts and leisure destinations
of leisure travel to resorts and leisure destinations
of leisure travel to resorts and leisure destinations
Looking forward, Braemar is well positioned to
Looking forward, Braemar is well positioned to
Looking forward, Braemar is well positioned to
while continuing to restrict corporate travel for
while continuing to restrict corporate travel for
while continuing to restrict corporate travel for
take advantage of the recovery that is continuing
take advantage of the recovery that is continuing
take advantage of the recovery that is continuing
meetings and conventions. However, as the year
meetings and conventions. However, as the year
meetings and conventions. However, as the year
in the hospitality industry. With the majority
in the hospitality industry. With the majority
in the hospitality industry. With the majority
progressed, urban centers started to regain some
progressed, urban centers started to regain some
progressed, urban centers started to regain some
of our assets in very desirable resort locations
of our assets in very desirable resort locations
of our assets in very desirable resort locations
activity but continued to remain relatively quiet
activity but continued to remain relatively quiet
activity but continued to remain relatively quiet
and the highest-quality portfolio in the public
and the highest-quality portfolio in the public
and the highest-quality portfolio in the public
versus historical norms.
versus historical norms.
versus historical norms.
markets, we are a differentiated story. Our
markets, we are a differentiated story. Our
markets, we are a differentiated story. Our
unique portfolio focused on the luxury segment,
unique portfolio focused on the luxury segment,
unique portfolio focused on the luxury segment,
Amid these changes, we are pleased to report
Amid these changes, we are pleased to report
Amid these changes, we are pleased to report
with many properties in drive-to leisure markets,
with many properties in drive-to leisure markets,
with many properties in drive-to leisure markets,
that Braemar’s business remained solid. At the
that Braemar’s business remained solid. At the
that Braemar’s business remained solid. At the
positions us to perform well in both the near term
positions us to perform well in both the near term
positions us to perform well in both the near term
company level, we worked diligently to repair
company level, we worked diligently to repair
company level, we worked diligently to repair
and the long term as business and group travel
and the long term as business and group travel
and the long term as business and group travel
our balance sheet that was so badly damaged by
our balance sheet that was so badly damaged by
our balance sheet that was so badly damaged by
resumes. We are also seeing more attractive
resumes. We are also seeing more attractive
resumes. We are also seeing more attractive
COVID-19. We replaced the massive amount of
COVID-19. We replaced the massive amount of
COVID-19. We replaced the massive amount of
acquisition opportunities due to the continued
acquisition opportunities due to the continued
acquisition opportunities due to the continued
cash drained from the company through strategic
cash drained from the company through strategic
cash drained from the company through strategic
stress felt by certain hotel owners, as well as
stress felt by certain hotel owners, as well as
stress felt by certain hotel owners, as well as
equity raising via our ATM, non-traded preferred
equity raising via our ATM, non-traded preferred
equity raising via our ATM, non-traded preferred
the unprecedented strength in leisure demand.
the unprecedented strength in leisure demand.
the unprecedented strength in leisure demand.
equity
equity
equity
issuances, and continued cost-cutting
issuances, and continued cost-cutting
issuances, and continued cost-cutting
Further, with a portfolio that
Further, with a portfolio that
Further, with a portfolio that
is currently
is currently
is currently
initiatives. Through our capital markets and asset
initiatives. Through our capital markets and asset
initiatives. Through our capital markets and asset
generating positive cash flow at the corporate
generating positive cash flow at the corporate
generating positive cash flow at the corporate
management activities, we were able to improve
management activities, we were able to improve
management activities, we were able to improve
level, we will continue to be on offense as the
level, we will continue to be on offense as the
level, we will continue to be on offense as the
our balance sheet and liquidity by extending
our balance sheet and liquidity by extending
our balance sheet and liquidity by extending
company’s profitability returns.
company’s profitability returns.
company’s profitability returns.
maturities, lowering our leverage, and increasing
maturities, lowering our leverage, and increasing
maturities, lowering our leverage, and increasing
our cash on hand. By the end of 2021, we were
our cash on hand. By the end of 2021, we were
our cash on hand. By the end of 2021, we were
In closing, I’m proud of our efforts and while we
In closing, I’m proud of our efforts and while we
In closing, I’m proud of our efforts and while we
able to both cease our equity raising initiative
able to both cease our equity raising initiative
able to both cease our equity raising initiative
are still in the early stages of the recovery, we
are still in the early stages of the recovery, we
are still in the early stages of the recovery, we
and return to being cashflow positive at the
and return to being cashflow positive at the
and return to being cashflow positive at the
continue to believe that Braemar represents a
continue to believe that Braemar represents a
continue to believe that Braemar represents a
corporate level. As a result of this, our leverage
corporate level. As a result of this, our leverage
corporate level. As a result of this, our leverage
compelling opportunity in the lodging REIT space.
compelling opportunity in the lodging REIT space.
compelling opportunity in the lodging REIT space.
also returned to pre-COVID levels.
also returned to pre-COVID levels.
also returned to pre-COVID levels.
We see a clear path for continued, steady strength
We see a clear path for continued, steady strength
We see a clear path for continued, steady strength
in our operating performance and remain
in our operating performance and remain
in our operating performance and remain
Our portfolio composition, which was already
Our portfolio composition, which was already
Our portfolio composition, which was already
confident in our position to restore shareholder
confident in our position to restore shareholder
confident in our position to restore shareholder
heavily weighted toward luxury resorts at the
heavily weighted toward luxury resorts at the
heavily weighted toward luxury resorts at the
value as we continue to rebuild and grow the
value as we continue to rebuild and grow the
value as we continue to rebuild and grow the
start of the pandemic served as the engine to
start of the pandemic served as the engine to
start of the pandemic served as the engine to
company over the course of 2022.
company over the course of 2022.
company over the course of 2022.
drive our liquidity and performance as many of
drive our liquidity and performance as many of
drive our liquidity and performance as many of
our hotels are in drive-to leisure markets and
our hotels are in drive-to leisure markets and
our hotels are in drive-to leisure markets and
Thank you for your continued investment in
Thank you for your continued investment in
Thank you for your continued investment in
have been well positioned to benefit from the
have been well positioned to benefit from the
have been well positioned to benefit from the
Braemar Hotels & Resorts.
Braemar Hotels & Resorts.
Braemar Hotels & Resorts.
resurgence of pent-up
resurgence of pent-up
resurgence of pent-up
leisure demand. This
leisure demand. This
leisure demand. This
dynamic allowed Braemar to retain its position
dynamic allowed Braemar to retain its position
dynamic allowed Braemar to retain its position
Sincerely,
Sincerely,
Sincerely,
as the highest RevPAR lodging REIT in the sector.
as the highest RevPAR lodging REIT in the sector.
as the highest RevPAR lodging REIT in the sector.
In fact, we were able to expand the gap relative
In fact, we were able to expand the gap relative
In fact, we were able to expand the gap relative
to our nearest peers, while reaching our 2019
to our nearest peers, while reaching our 2019
to our nearest peers, while reaching our 2019
RevPAR levels and generating positive corporate
RevPAR levels and generating positive corporate
RevPAR levels and generating positive corporate
cashflow before them.
cashflow before them.
cashflow before them.
Richard J. Stockton
Richard J. Stockton
Richard J. Stockton
President & Chief Executive Officer
President & Chief Executive Officer
President & Chief Executive Officer
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
2 0 2 1 A N N U AL R E P O RT
B
B
B
R
R
R
A
A
A
E
E
E
M
M
M
A
A
A
R
R
R
H
H
H
O
O
O
T
T
T
E
E
E
L
L
L
S
S
S
&
&
&
R
R
R
E
E
E
S
S
S
O
O
O
R
R
R
T
T
T
S
S
S
2
2
2
0
0
0
2
2
2
1
1
1
A
A
A
N
N
N
N
N
N
U
U
U
A
A
A
L
L
L
R
R
R
E
E
E
P
P
P
O
O
O
R
R
R
T
T
T
S
S
S
S
S
S
&
&
&
&
&
&
R
R
R
R
R
R
E
E
E
E
E
E
S
S
O
O
R
R
S
S
S
O
O
O
R
R
R
S
O
R
T
T
T
T
T
T
S
S
S
S
S
S
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
14185 Dallas Parkway I Suite 1200 I Dallas, Texas 75254 I 972.490.9600 I www.bhrreit.com
R
R
E
E
P
P
O
O
R
R
T
T
R
R
R
E
E
E
P
P
P
O
O
O
R
R
R
T
T
T
R
E
P
O
R
T
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
Braemar Hotels and Resorts Cover 3-29-22.indd 1
3/29/22 1:49 PM
3/29/22 1:49 PM
3/29/22 1:49 PM
3/29/22 1:49 PM
3/29/22 1:49 PM
3/29/22 1:49 PM
2
2
0
0
2
2
1
1
2
2
2
0
0
0
2
2
2
1
1
1
2
0
2
1
A
N
N
U
A
A
N
N
N
N
U
U
A
A
A
N
N
N
N
N
N
U
U
U
A
A
A
L
L
L
A
A
L
L
A
L
B
B
B
B
B
B
R
R
A
A
E
E
M
M
A
A
R
R
R
R
R
A
A
A
E
E
E
M
M
M
A
A
A
R
R
R
R
A
E
M
A
R
H
H
O
O
T
T
H
H
H
O
O
O
T
T
T
H
O
T
E
E
E
E
E
E
L
L
L
L
L
L