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What changed in Braemar Hotels & Resorts Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Braemar Hotels & Resorts Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+584 added−616 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in Braemar Hotels & Resorts Inc.'s 2023 10-K

584 paragraphs added · 616 removed · 492 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

245 edited+8 added−20 removed374 unchanged
Biggest changeThomas 3.0%, comprised of a management fee of 0.4% and a royalty fee of 2.6% 20% of the excess, if any, of Operating Profit for such Fiscal Year over owner’s priority for such Fiscal Year 1.0% of gross revenues $8,000,000 plus 10.25% of the amount of owner-funded capital expenditures Not applicable Park Hyatt Beaver Creek Resort & Spa Greater of 3.0% or $2,405,544 on an annual basis (increased annually by lesser of CPI or 8% of prior year management fee) 12.5% Profit plus 15% of Profit less the Base Fee that is in excess of $4 million Not applicable Not applicable Not applicable Hotel Yountville Greater of $16,294 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 30 Hotel Management Fee (1) Incentive Fee Marketing Fee Owner’s Priority (2) Owner’s Investment (2) The Ritz-Carlton Sarasota 3% 20% of Available cash flow defined as Net Operating Income minus the owner’s priority 1% of gross hotel revenues for each fiscal year, excluding member dues, initiation, or joining fees or deposits of Club members $7,465,000 plus 10.25% of the amount of owner-funded capital expenditures Not applicable The Ritz-Carlton Lake Tahoe 3% The sum of (i) 15% of the amount by which Adjusted House Profit (“AHP”) for such Fiscal Year exceeds the owner’s priority; 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 1% of gross revenues for each fiscal year $8,208,965.08 plus 10% of the amount of certain owner-funded renovation expenditures, plus 10% of any other owner-funded capital expenditures after 1/1/2022 that were approved by manager, plus a varying additional credit based on the number of condominium units (which are to be constructed) in the voluntary rental program Not applicable Mr.
Biggest changeThomas 3.0%, comprised of a management fee of 0.4% and a royalty fee of 2.6% 20% of the excess, if any, of Operating Profit for such Fiscal Year over owner’s priority for such Fiscal Year 1.0% of gross revenues $10,634,277 plus 10.25% of the amount of owner-funded capital expenditures Not applicable Park Hyatt Beaver Creek Resort & Spa Greater of 3.0% or $2,487,332 on an annual basis (increased annually by lesser of CPI or 8% of prior year management fee) 12.5% Profit plus 15% of Profit less the Base Fee that is in excess of $4 million Not applicable Not applicable Not applicable Hotel Yountville Greater of $16,897.11 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 The Ritz-Carlton Sarasota 3% 20% of Available cash flow defined as Net Operating Income minus the owner’s priority 1% of gross hotel revenues for each fiscal year, excluding member dues, initiation, or joining fees or deposits of Club members $7,471,325 plus 10.25% of the amount of future owner-funded capital expenditures Not applicable The Ritz-Carlton Lake Tahoe 3% The sum of (i) 15% of the amount by which Adjusted House Profit (“AHP”) for such Fiscal Year exceeds the owner’s priority; 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 1% of gross revenues for each fiscal year $8,226,742.04 plus 10% of the amount of certain owner-funded renovation expenditures, plus 10% of any other owner-funded capital expenditures after 1/1/2022 that were approved by manager, plus a varying additional credit based on the number of condominium units (which are to be constructed) in the voluntary rental program Not applicable 30 Hotel Management Fee (1) Incentive Fee Marketing Fee Owner’s Priority (2) Owner’s Investment (2) Cameo Beverly Hills Greater of $16,897.11 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 The Ritz-Carlton Reserve Dorado Beach 3%, comprised of a management fee of 0.4% and a royalty fee of 2.6% $250,000 if Net House Profit exceeds Owner’s Priority plus 20% of the excess of Net House Profit over Owner’s Priority with annual true-up 1% of Gross Revenues plus allocation of reimbursable expenses $14,351,404 plus (a) 11% of any operating losses funded by owner, plus (b) 11% of certain non-routine capital expenditures incurred by manager and certain non-routine owner-funded capital expenditures, plus (c) $100,000 time the number of condominium units in the voluntary rental program at the beginning of each FY, plus (d) an amount negotiated at the beginning of each year for the West Beach Estates and East Beach Villas participating in the standard and flexible voluntary rental program Not applicable Four Seasons Resort Scottsdale 3% 7.5% of the amount of operating profit (after deducting property taxes, insurance premiums, and expenditures from the capital reserve) for a particular period, minus the Hurdle Amount applicable for the same period.
Valet parking is available in a two level subterranean garage. 9 • 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.
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’s original art 9 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.
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.
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®, a diverse portfolio of independent hotels around the world that reflect unique vision, design and environments.
See “Certain Agreements-Hotel Management Agreement.” Design and Construction Services 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 installation of furniture, fixtures and equipment (“FF&E”), and related services.
See “Certain Agreements-Hotel Management Agreement.” Design and Construction Services Ashford Inc. also provides us with design and construction services through Premier, including construction management, interior design, architectural services and oversight, and the purchasing, expediting, warehousing coordination, freight management and supervision of installation of furniture, fixtures and equipment (“FF&E”), and related services.
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.
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 of 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.
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; the Ritz-Carlton Reserve Dorado Beach management agreements requires that the sale must occur within 18 months after the 30-day right of first negotiation period) or the notice of sale is deemed void and we must provide a new notice to the manager.
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; 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; The Ritz-Carlton Reserve Dorado Beach management agreements requires that the sale must occur within 18 months after the 30-day right of first negotiation period) or the notice of sale is deemed void and we must provide a new notice to the manager.
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 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.
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 stepchildren) and spouses.
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 stepchildren) 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.
“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.
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 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.
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).
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).
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 46 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.
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.
Thomas is $6,000,000, plus 85% of 10.25% of owner-funded capital expenditures incurred after November 20, 2019, (e) in the case of The Ritz-Carlton Sarasota is $6,000,000, (f) in the case of The Ritz-Carlton Lake Tahoe is $7,200,000 minus (b) (i) the annual amount of certain shared facilities expenses relating to offsite parcels that are deemed to gross operating expenses for a fiscal year, and (g) in the case of Dorado Beach, a Ritz-Carlton Reserve, it is 75% 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 ranges from 0.65 to 1.80 (this item is currently being negotiated for Dorado Beach, a Ritz-Carlton Reserve), and (iii) the fact that the criteria set forth in (i) or (ii) is not the result of certain disruptive events, such force majeure, major renovation, or any default by us under the hotel management agreement.
Thomas is $6,000,000, plus 85% of 10.25% of owner-funded capital expenditures incurred after November 20, 2019, (e) in the case of The Ritz-Carlton Sarasota is $6,000,000, (f) in the case of The Ritz-Carlton Lake Tahoe is $7,200,000 minus the annual amount of certain shared facilities expenses relating to offsite parcels that are deemed to gross operating expenses for a fiscal year, and (g) in the case of Dorado Beach, a Ritz-Carlton Reserve, it is 75% 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 ranges from 0.65 to 1.80 (this item is currently being negotiated for Dorado Beach, a Ritz-Carlton Reserve), and (iii) the fact that the criteria set forth in (i) or (ii) is not the result of certain disruptive events, such force majeure, major renovation, or any default by us under the hotel management agreement.
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 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.
Remington Hospitality 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 Hospitality subject to certain limitations; (ii) infringement by Remington Hospitality of any third party’s intellectual property rights; (iii) employee claims based on a substantial violation by Remington Hospitality of employment laws or that are a direct result of the corporate policies of Remington Hospitality; (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 Hospitality; or (v) the breach by Remington Hospitality of the master hotel management agreement, including action taken by Remington Hospitality beyond the scope of its authority under the master hotel management agreement, which is not cured.
Bennett (including stepchildren) 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.
Bennett (including stepchildren) and spouses; • we experience a change in control and terminate the master hotel management agreement between us and Remington Hospitality 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 Hospitality 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.
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- 45 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.
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.
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 42 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.
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.
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 $10.5 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 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 $10.5 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 35 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.
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.
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 41 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.
Notwithstanding the foregoing, we will not have the right to terminate this agreement if during either fiscal year during an applicable test period, one or more of the following events occurs and, in their totality, after giving effect to proceeds received from any applicable business interruption insurance, they adversely affect gross operating profit or RevPAR: casualty, condemnation, a force majeure event, a capital refurbishing program affecting 20% or more of the Four Seasons Resort Scottsdale.
Notwithstanding the foregoing, we will not have the right to terminate this agreement if during either fiscal year during an applicable test period, one or more of the following events occurs and, in their totality, after giving effect to proceeds received from any applicable business interruption insurance, they adversely affect gross operating 34 profit or RevPAR: casualty, condemnation, a force majeure event, a capital refurbishing program affecting 20% or more of the Four Seasons Resort Scottsdale.
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.
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. 26 • Equity Compensation.
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 or 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 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 Hospitality 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 or 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.
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 26 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”).
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”).
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.
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 40 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.
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%.
Remington Hospitality 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 Hospitality and the TRS lessee, and (ii) such hotel’s RevPAR yield penetration is less than 80%.
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; • a casualty to, condemnation of, or force majeure involving a hotel; or 41 • upon a default by Premier or us that is not cured prior to the expiration of any applicable cure periods.
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; • 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.
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).
Each of the following is a default under the project management MEA: • we or Premier experience a bankruptcy-related event; 46 • 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).
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.
Remington Hospitality 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.
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.
The advisory agreement provides that Ashford LLC (including its officers, 24 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.
Executive Order 13224, or is a person otherwise identified by any government or legal authority as being someone with whom Marriott is prohibited from transacting business. 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.
Executive Order 13224, or is a person otherwise identified by any government or legal authority as being someone with whom Marriott is prohibited from transacting business. 32 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.
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 51 independent owner-managed hotels, during periods of economic downturn when leisure and business travelers become more sensitive to room rates.
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.
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 32 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.
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.
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.
There are certain instances in which the 30-day notice and cure period can be extended to up to 120 days. 42 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.
In the case of The Notary Hotel, The Clancy, and The Ritz-Carlton Reserve Dorado Beach, 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.
In the case of The Notary Hotel, The 31 Clancy, and The Ritz-Carlton Reserve Dorado Beach, 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.
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 of coverages previously available under policies set forth above (for example, communicable disease, abuse & molestation coverages previously available under general liability policies).
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 of coverages previously available under policies set forth above (for example, communicable disease, abuse and molestation coverages previously available under general liability policies).
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 23 maturities. We target leverage of 35% net debt to gross assets.
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 35% net debt to gross assets.
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. 49 Termination of Leases.
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.
The financial statements as of and for the year ended December 31, 2021 were audited and included in an amendment to our Current Report on Form 8-K filed on March 11, 2022. No financial statements were prepared, audited or reviewed for the year ended December 31, 2020 and for the period from January 1, 2022 through March 10, 2022.
The financial statements as of and for the year ended December 31, 2021 were audited and included in an amendment to our Current Report on Form 8-K filed on March 11, 2022. No financial statements were prepared, audited or reviewed for the period from January 1, 2022 through March 10, 2022.
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 33 criteria relating to the performance of the applicable hotel. The performance period is measured with respect to any two consecutive fiscal years.
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.
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. 36 Early Termination for Casualty.
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.
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 incentive fee is designed to encourage Remington Hospitality to generate higher house profit at each hotel by increasing the fee due to Remington Hospitality 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.
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.
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 Hospitality submits the proposed annual operating budget for approval by TRS lessee.
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. 4 Ashford LLC also actively participates in brand advisory committee meetings to provide feedback and input on new hotel brand initiatives. Disciplined Capital Allocation Strategy .
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. Ashford LLC also actively participates in brand advisory committee meetings to provide feedback and input on new hotel brand initiatives. Disciplined Capital Allocation Strategy .
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, 2033, and all of these agreements have three 10-year automatic extension options remaining, at the discretion of the manager. Events of Default.
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, 2033, and all of these agreements have two 10-year automatic extension options remaining, at the discretion of the manager. Events of Default.
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.
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 Hospitality Hotel Management MEA.” Maintenance and Modifications.
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.
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 Hospitality 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 Hospitality 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.
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.
We may use the proceeds from any borrowings for working capital, consistent with industry practice, to: • purchase interests in partnerships or joint ventures; 23 • finance the origination or purchase of debt investments; or • finance acquisitions, expand, redevelop or improve existing properties, or develop new properties or other uses.
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.
The master hotel management agreement will also govern the management of hotels we acquire in the future that are managed by Remington Hospitality, 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 Hospitality, or (ii) by a majority vote, elect not to engage Remington Hospitality 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 Hospitality for the particular hotel, or (B) based on the prior performance of Remington Hospitality, another manager or developer could perform the management duties materially better than Remington Hospitality for the particular hotel.
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 37 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.
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 Hospitality takes over management upon our acquisition, in which case, for the first five years, the incentive management fee to be paid to Remington Hospitality, 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.
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.
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.
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.
Bardessono Hotel and Spa. The Bardessono Hotel and Spa is subject to a ground lease with Bardessono Brothers LLC and expires December 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.
All related party transactions are approved by either the Related Party Transactions Committee or the independent members of our board of directors. 28 \ Hotel Management Agreements General To qualify as a REIT, we cannot directly or indirectly operate any of our hotel properties. Third parties must operate our hotel properties.
All related party transactions are approved by either the Related Party Transactions Committee or the independent members of our board of directors. \ Hotel Management Agreements General To qualify as a REIT, we cannot directly or indirectly operate any of our hotel properties. Third parties must operate our hotel properties.
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. 34 Performance Termination.
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.
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.
Bennett and their affiliates, as the case may be, will not pursue those opportunities (except as described below) and will give us a 43 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 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.
If we elect to pursue an investment opportunity that consists of the management and operation of a hotel property, we will hire Remington Hospitality to provide such services unless our independent directors either (i) unanimously elect not to engage Remington Hospitality, or (ii) by a majority vote, elect not to engage Remington Hospitality 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 Hospitality for the particular hotel, or (B) based on the prior performance of Remington Hospitality, another manager or developer could perform the management duties materially better than Remington Hospitality for the particular hotel.
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. 48 Assignment and Subleasing.
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 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 .
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 Philadelphia International Airport. 10 Operating History .
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 24 appropriate.
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.
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 that event, the related lease will not terminate and we will pay all insurance proceeds to the TRS lessee. 48 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.
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.
Both outlets overlook the golf course and the Pacific Ocean. • Other Amenities : The hotel has a fitness center, outdoor pool, outdoor whirlpool, tennis and pickleball courts, basketball court, business center, lush gardens and pathways, valet parking and a gift shop. Location and Access.
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.
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 Hospitality 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 Hospitality 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.
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.
Instead, Premier shall allocate investment opportunities it identifies pursuant to the terms of our advisory agreement. A material modification for 45 this purpose means any modification of our initial investment guidelines to be competitive with Ashford Trust’s investment guidelines. Our Exclusivity Rights.
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.
Ground Leases Two of our hotels are subject to ground leases that cover all of the land underlying the respective hotels. 49 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.
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. 10 Location and Access .
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.
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.
With respect to any hotel managed by Remington Hospitality 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 Hospitality, 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 Hospitality 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.
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.
The 50 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.
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.
The two hotels owned by the joint venture are leased to subsidiaries of the joint venture, which two subsidiaries we 47 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.
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.
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 Hospitality termination fees, plus any amounts otherwise due to Remington Hospitality pursuant to the terms of the master hotel management agreement.
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.
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 Hospitality became a subsidiary of Ashford Inc., and the master hotel management agreement between Remington Hospitality and us remains in effect.
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; • 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.
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; 37 • the failure of Remington Hospitality to satisfy certain performance standards; • for the convenience of our TRS lessee; • a casualty to, condemnation of, or force majeure involving a hotel; or • upon a default by Remington Hospitality or us that is not cured prior to the expiration of any applicable cure periods.
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.
Complimentary bicycles and 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.
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 .
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 .
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 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 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 Hospitality an amount equal to the management fee (both base fees and incentive fees) estimated to be payable to Remington Hospitality 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 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.
If Remington Hospitality 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 Hospitality, then the TRS lessee has the right to terminate the management agreement with respect to such hotel upon 45 days’ written notice to Remington Hospitality and to pay to Remington Hospitality the termination fee described above.
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.
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 Hospitality became a subsidiary of Ashford Inc., and the mutual exclusivity agreement between Remington Hospitality and us remains in effect.
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).
Each of the following is a default under the hotel management MEA: • we or Remington Hospitality experience a bankruptcy-related event; • we fail to reimburse Remington Hospitality as described under “Reimbursement of Costs,” subject to a 30-day cure period; and • we or Remington Hospitality 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).
Any such right of first offer granted 47 to Ashford Trust will be subject to certain prior rights, if any, granted to the managers of the related properties or other third parties.
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.
We have agreed that we will not revise our initial investment guidelines to be directly competitive with 27 the investment guidelines of Ashford Trust as of November 19, 2013.
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.
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.
Except to the extent indemnified by Remington Hospitality as described in the preceding paragraph, the TRS lessee will indemnify Remington Hospitality against all damages not covered by insurance and that arise from: (i) the performance of Remington Hospitality’ services under the master hotel management agreement; (ii) the condition or use of our hotels; (iii) certain liabilities to which Remington Hospitality 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 Hospitality against Remington Hospitality that are based on a violation or alleged violation of the employment laws.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese 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.
Biggest changeThese 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. 72 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.
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.
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; 58 • 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.
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.
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, 73 or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.
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.
Similarly, we are required to make minimum base hotel management fee payments under our hotel management agreements with Remington Hospitality, 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.
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.
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 Hospitality, 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.
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 77 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.
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.
Facing mounting budget deficits, more state and local taxing 75 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.
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.
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. 55 We may be unable to successfully integrate and operate acquired properties, which may have a material adverse effect on our business and operating results.
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.
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.
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 70 • current coverage thresholds may not continue to be available at reasonable rates.
The lender may also foreclose on the hotels if there is a material loss that is not insured. 71 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.
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.
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.
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. 53 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.
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. 64 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.
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.
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.
Our issuance 71 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.
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.
However, it is possible that these changes could increase the U.S. 78 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.
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.
A franchisor or manager could condition the continuation of branding and operational support based on the completion of capital improvements 56 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 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.
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 67 growth.
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.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we 79 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.
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.
For each hotel managed by Remington Hospitality, its competitive set consists of a small group of hotels in the relevant market that we and Remington Hospitality 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.
In connection with this policy, our board of directors has established a Related Party Transactions Committee (consisting of Messrs. Vaziri and Rinaldi and 66 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.
In connection with this policy, our board of directors has established a Related Party Transactions Committee (consisting of Messrs. Vaziri 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.
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 72 • the right of the limited partners to consent to transfers of the general partnership interest and mergers of the operating partnership under specified circumstances.
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.
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 59 disruptions.
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.
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.
The above mentioned dual responsibilities may create conflicts of interest for our officers that could result in decisions or allocations of investments that 63 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.
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.
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 76 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.
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.
Our ability, if any, to 68 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.
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.
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 69 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.
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 could perform the duties materially better.
To the extent we have the right or control the right to direct such matters, the hotel management MEA requires us to engage Remington Hospitality 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 Hospitality, or (ii) based on special circumstances or past performance, by a majority vote, elect not to engage Remington Hospitality because they have determined, in their reasonable business judgment, that it would be in our best interest not to engage Remington Hospitality or that another manager or developer could perform the duties materially better.
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. 69 We may decide to sell hotel properties in the future.
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.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, with tax 70 provisions primarily focused on implementing a 15% corporate alternative minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, with tax provisions primarily focused on implementing a 15% corporate alternative minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases.
Moreover, the existence of shares of our common stock reserved for issuance as restricted shares or upon exchange of options or redemption of common units may adversely 80 affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.
Moreover, the existence of shares of our common stock reserved for issuance as restricted shares or upon exchange of options or redemption of common units may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.
Furthermore, we 63 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.
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.
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.
The project management MEA and master project management 64 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.
Moreover, 68 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.
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.
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.
Similarly, we are required to make minimum base hotel management fee payments under our hotel management agreements with Remington Hospitality, a subsidiary of Ashford Inc., which must be paid even if revenues at our hotels decline significantly.
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.
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 55 stockholders.
We contractually engage hotel managers, such as Marriott (or its affiliates), Hilton (or its affiliates), Four Seasons, 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.
We contractually engage hotel managers, such as Marriott (or its affiliates), Hilton (or its affiliates), Four Seasons, Hyatt, Accor and our affiliate, Remington Hospitality, which is owned by Ashford Inc., to operate, and to employ the personnel required to operate, our hotels.
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 58 and permitting procedures and regulations.
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.
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 57 terms of a long-term management agreement encumbering our property may reduce the value of the property.
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.
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.
Our relationships with Ashford LLC, Ashford Inc., Ashford Trust, Stirling Inc., 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.
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.
Maryland statutory law provides that an act (or determination not to 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.
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.
If our hotel managers, including Ashford Hospitality Services LLC (“AHS”) and its subsidiaries (including Remington Hospitality), do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.
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.
We expect Remington Hospitality 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.
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.
Privacy and information security risks have generally increased in recent years because of the proliferation of new 59 technologies, such as ransomware, and the increased sophistication and activities of perpetrators of cyber-attacks.
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.
Additionally, we and AHS and its subsidiaries, including Remington Hospitality, must comply with the provisions of the private letter ruling we obtained from the IRS in connection with Ashford Inc.’s acquisition of Remington Hospitality to ensure that AHS and its subsidiaries, including Remington Hospitality, continue to qualify as “eligible independent contractors.” Complying with REIT requirements may cause us to forego otherwise attractive opportunities.
We are increasingly dependent on information technology, and potential cyber-attacks, security problems or other disruption and expanding social media vehicles present new risks.
We are increasingly dependent on information technology, and cyber-attacks, security problems or other disruption and expanding social media vehicles present new risks.
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 market value or income potential of real estate-related investments declines as a result of changes in 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”).
Moreover, the IRS may impose excise taxes and penalties based on transactions that occurred prior to the spin-off. 76 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.
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 Hospitality) do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.
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.
As a result of our affiliations with Ashford Trust, Ashford Inc. and its subsidiaries (including Ashford LLC, Remington Hospitality and Premier), the terms, including fees and other amounts payable, of agreements between us and Ashford Trust, Ashford LLC or Remington Hospitality, including our master hotel management agreement and hotel management MEA with Remington Hospitality 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.
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.
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 Hospitality and the master project management agreement with Premier be approved by a majority or, in certain circumstances, all, of our independent directors.
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.
Remington Hospitality may be able to pursue lodging investment opportunities that compete with us. Pursuant to the terms of our hotel management MEA with Remington Hospitality, if investment opportunities that satisfy our investment criteria are identified by Remington Hospitality or its affiliates, Remington Hospitality will give us a written notice and description of the investment opportunity.
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.
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, Ashford Trust or Stirling Inc. has an interest.
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.
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 Hospitality-managed hotel, thereby making it more difficult for us to elect not to use Remington Hospitality for future hotel management.
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 the opportunity, Remington Hospitality 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 Hospitality, on materially the same terms and conditions as offered to us.
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.
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 Hospitality may compete with us with respect to certain investments that we may want to acquire.
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 $16,000 per hotel (increased annually based on consumer price index adjustments), which could adversely impact our liquidity and financial condition.
As a result, even if revenues at our hotels decline significantly, we will still be required to make minimum monthly payments to Remington Hospitality equal to approximately $17,000 per hotel (increased annually based on consumer price index adjustments), which could adversely impact our liquidity and financial condition.
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.
If we reject such an investment opportunity, either Ashford Trust or Remington Hospitality could pursue the opportunity and compete with us. In such a case, Mr. Monty J.
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.
Under our master hotel management agreement with Remington Hospitality, we have the right to terminate Remington Hospitality based on the performance of the applicable hotel, subject to the payment of a termination fee.
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, 2022, Mr. Monty J.
Conflicts of interest in general and specifically relating to Remington Hospitality 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, 2023, Mr. Monty J.
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 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 Hospitality, a subsidiary of Ashford Inc., pursuant to which Remington Hospitality currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and the Cameo Beverly Hills.
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.
However, given the authority and/or operational latitude provided to Remington Hospitality under the master hotel management agreement and to Premier under the master project management agreement, 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 19.6% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc.
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 610,261 shares of Ashford Inc. common stock, which represented an approximate 19.0% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc.
As of December 31, 2022, we had approximately $1.3 billion of outstanding indebtedness, including approximately $1.3 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.
As of December 31, 2023, 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.
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, 2023, we have completed the $25.0 million repurchase authorization.
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 12, 2024, we have completed the $25.0 million repurchase authorization.
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 $16,000 per 53 hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues.
Similarly, pursuant to our hotel management agreement with Remington Hospitality, a subsidiary of Ashford Inc., we pay Remington Hospitality monthly base hotel management fees on a per hotel basis equal to the greater of approximately $17,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues.
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.
A slower spending on the services we provide could have a negative impact on our revenue growth. 66 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.
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 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 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.
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.
Conflicts of interest with Remington Hospitality 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 Hospitality, a subsidiary of Ashford Inc., currently manages the Pier House Resort & Spa, the Bardessono Hotel and Spa, Hotel Yountville and Cameo Beverly Hills.
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.
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.
Series D Convertible Preferred Stock, which, along with all unpaid accrued and accumulated dividends thereon, was convertible (at a conversion price of $117.50 per share) into an additional approximate 4,145,385 shares of Ashford Inc. common stock, which if converted as of December 31, 2022 would have increased the Bennetts’ ownership interest in Ashford Inc. to 65.5%.
Series D Convertible Preferred Stock, which, along with all unpaid accrued and accumulated dividends thereon, was convertible (at a conversion price of $117.50 per share) into an additional approximate 4,229,668 shares of Ashford Inc. common stock, which if converted as of December 31, 2023 would have increased the Bennetts’ ownership interest in Ashford Inc. to 65%.
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.
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.
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 to reduce staffing at our hotels than we would if we employed such personnel directly.
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 we cannot reduce staffing at our hotels as we would if we employed such personnel directly.
The 18,758,600 shares of Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 362,959 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.
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 Hospitality and a project management MEA and master project management agreement with Premier.
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.
Higher interest rates have increased 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.
The Company expects to pay a quarterly cash dividend of $0.05 per share for the Company’s common stock for 2023, or $0.20 per share on an annualized basis.
The Company paid a quarterly cash dividend of $0.05 per share for the Company’s common stock for 2023, or $0.20 per share on an annualized basis.
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.
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.
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. 56 We do not have any employees, and rely on our hotel managers to employ the personnel required to operate the hotels we own.
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 cannot control staffing at our hotels.
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.
Ten of our 16 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.
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.
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.
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.
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.
These risks are discussed more fully below and include, but are not limited to, risks related to: • 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; 52 • 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.
These risks are discussed more fully below and include, but are not limited to, risks related to: • 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; • catastrophic events or geopolitical conditions, such as the conflict between Russia and Ukraine and the more recent Israel-Hamas war; • availability, terms and deployment of capital; • unanticipated increases in financing and other costs, including changes 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 Hospitality and Premier), Stirling Inc. and our executive officers and our non-independent directors; • changes in personnel of Ashford LLC or the lack of availability of qualified personnel; • changes in governmental regulations, accounting rules, tax rates and similar matters; • 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. 52 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.
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. 73 Our board of directors can take many actions without stockholder approval.
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.

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Item 2. Properties

Properties — owned and leased real estate

5 edited+2 added−2 removed2 unchanged
Biggest changeC Beverly Hills Hotel (2) Los Angeles, CA 143 100 % 143 74.26 % 347.57 258.10 The Ritz-Carlton Reserve Dorado Beach (3) Dorado, Puerto Rico 96 100 % 96 63.53 % 1,928.50 1,225.27 Four Seasons Resort Scottsdale (4) Scottsdale, AZ 210 100 % 210 45.15 % 1,056.99 477.19 Ground Lease Properties (5) Hilton La Jolla Torrey Pines (6) La Jolla, CA 394 75 % 296 77.25 % 250.95 193.87 Bardessono Hotel and Spa (7) Yountville, CA 65 100 % 65 63.96 % 1,257.56 804.31 Total 4,181 3,946 65.62 % $ 451.56 $ 296.30 ________ (1) The above information does not include the operations of the voluntary rental program with respect to condominium units not owned by the Company.
Biggest changeThomas, USVI 180 100 % 180 66.43 % 1,099.14 730.15 Park Hyatt Beaver Creek Resort & Spa Beaver Creek, CO 193 100 % 193 55.81 % 645.73 360.35 Hotel Yountville Yountville, CA 80 100 % 80 60.78 % 694.51 422.10 The Ritz-Carlton Sarasota Sarasota, FL 276 100 % 276 62.98 % 587.54 370.04 The Ritz-Carlton Lake Tahoe (1) Truckee, CA 170 100 % 170 50.72 % 731.00 370.79 Cameo Beverly Hills (2) Los Angeles, CA 143 100 % 143 72.78 % 308.71 224.69 The Ritz-Carlton Reserve Dorado Beach (3) Dorado, Puerto Rico 96 100 % 96 63.00 % 2,126.17 1,339.53 Four Seasons Resort Scottsdale Scottsdale, AZ 210 100 % 210 48.27 % 967.22 466.92 Ground Lease Properties (4) Hilton La Jolla Torrey Pines (5) La Jolla, CA 394 75 % 296 78.76 % 253.71 199.82 Bardessono Hotel and Spa (6) Yountville, CA 65 100 % 65 66.22 % 1,045.70 692.48 Total 4,192 3,957 67.13 % $ 440.41 $ 295.65 ________ (1) The above information does not include the operations of the voluntary rental program with respect to condominium units not owned by the Company.
Hotel Properties As of December 31, 2022, we held ownership interests in 16 hotel properties that were included in our consolidated operations, which included direct ownership in 14 hotel properties and 75% ownership in two hotel properties through equity investments with our partner.
Hotel Properties As of December 31, 2023, we held ownership interests in 16 hotel properties that were included in our consolidated operations, which included direct ownership in 14 hotel properties and 75% ownership in two hotel properties through equity investments with our partner.
The ground lease contains one extension option of either 10 or 20 years dependent upon capital investment spend during the lease term. (7) The initial ground lease expires in 2065. The ground lease contains two 25-year extension options, at our election.
(4) Some of our hotel properties are on land subject to ground leases, two of which cover the entire property. (5) The ground lease expires in 2067. The ground lease contains one extension option of either 10 or 20 years dependent upon capital investment during the lease term. (6) The initial ground lease expires in 2065.
As of December 31, 2022, all 16 hotel properties were encumbered by loans as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indebtedness.” 81 Hotel Properties The following table presents certain information related to our hotel properties: Hotel Property Location Total Rooms % Owned Owned Rooms Year Ended December 31, 2022 Occupancy ADR RevPAR Fee Simple Properties Capital Hilton Washington, D.C. 550 75 % 413 65.17 % $ 228.36 $ 148.82 Marriott Seattle Waterfront Seattle, WA 361 100 % 361 56.88 % 286.14 162.75 The Notary Hotel Philadelphia, PA 499 100 % 499 55.92 % 218.34 122.10 The Clancy San Francisco, CA 410 100 % 410 70.05 % 298.91 209.38 Sofitel Chicago Magnificent Mile Chicago, IL 415 100 % 415 65.36 % 250.78 163.92 Pier House Resort & Spa Key West, FL 142 100 % 142 74.81 % 707.12 529.03 The Ritz-Carlton St.
The following table presents certain information related to our hotel properties: Hotel Property Location Total Rooms % Owned Owned Rooms Occupancy ADR RevPAR Fee Simple Properties Capital Hilton Washington, D.C. 550 75 % 413 72.92 % $ 250.11 $ 182.39 Marriott Seattle Waterfront Seattle, WA 369 100 % 369 70.69 % 298.39 210.94 The Notary Hotel Philadelphia, PA 499 100 % 499 62.44 % 230.59 143.97 The Clancy San Francisco, CA 410 100 % 410 70.81 % 309.19 218.95 Sofitel Chicago Magnificent Mile Chicago, IL 415 100 % 415 70.30 % 239.57 168.42 Pier House Resort & Spa Key West, FL 142 100 % 142 72.66 % 641.70 466.29 The Ritz-Carlton St.
(2) Includes 138 hotel rooms and five residences adjacent to the hotel. (3) The above information does not include the operations of the voluntary rental program with respect to residential units not owned by the Company. The results of the hotel are included from March 11, 2022 through December 31, 2022.
Following an extensive renovation, which is expected to be completed by the end of 2025, the hotel will join LXR Hotels & Resorts. 81 (3) The above information does not include the operations of the voluntary rental program with respect to residential units not owned by the Company.
Removed
Thomas, USVI 180 100 % 180 73.81 % 1,204.88 889.30 Park Hyatt Beaver Creek Resort & Spa Beaver Creek, CO 190 100 % 190 60.58 % 601.05 364.13 Hotel Yountville Yountville, CA 80 100 % 80 54.06 % 906.82 490.21 The Ritz-Carlton Sarasota Sarasota, FL 276 100 % 276 74.47 % 617.66 459.97 The Ritz-Carlton Lake Tahoe (1) Truckee, CA 170 100 % 170 57.60 % 736.50 424.40 Mr.
Added
(2) Includes 138 hotel rooms and five residences adjacent to the hotel. On August 1, 2023, the Company announced the rebranding and planned conversion of its Mr. C Beverly Hills in Los Angeles, California to the Cameo Beverly Hills.
Removed
(4) The results of the hotel are included from December 1, 2022 through December 31, 2022. (5) Some of our hotel properties are on land subject to ground leases, two of which cover the entire property. (6) The ground lease expires in 2067.
Added
The ground lease contains two 25-year extension options, at our election.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

8 edited+7 added−8 removed2 unchanged
Biggest changeAs a result of the settlement related to the 2018 performance test failure, the Company recorded a gain of approximately $868,000 in 2022, that is recorded as a reduction of management fees and included in “management fees” on the Company’s consolidated statement of operations. 82 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.
Biggest changeItem 3. Legal Proceedings 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.
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.
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 that any potential loss to the Company is reasonably estimable at this time.
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
If we ultimately do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods. 82 Item 4. Mine Safety Disclosures None. PART II
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.
The court has entered an order granting class certification with respect to: (i) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (ii) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment.
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).
To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the Americans with Disability Act and similar state laws).
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.
Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class; however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. The opt-out period has been extended until such time that discovery has concluded.
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.
Our assessment may change depending upon the development of any current or future legal proceedings, and the final results of such legal proceedings cannot be predicted with certainty.
As of December 31, 2022, no amounts have been accrued. We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated.
At the end of the mediation, the mediator submitted a mediator’s proposal for approximately $3.5 million, which the parties are still considering. The allocation to Hilton La Jolla Torrey Pines would be approximately $371,000, which has been accrued as of December 31, 2023. We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated.
Removed
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.
Added
In May 2023, the trial court requested additional briefing from the parties to determine whether the case should be maintained, dismissed, or the class de-certified. After submission of the briefs, the court requested that the parties submit stipulations for the court to rule upon.
Removed
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 Accor management agreement has occurred and an injunction to prevent Ashford TRS Chicago II from terminating the Accor management agreement.
Added
On February 13, 2024, the judge ordered the parties to submit additional briefing related to on-site breaks.
Removed
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.
Added
As of December 31, 2023, no amounts have been accrued. On June 8, 2022 a lawsuit was filed against various Hilton entities on behalf of a class of all hourly employees at all Hilton-branded managed properties in California, including Hilton La Jolla Torrey Pines.
Removed
On July 20, 2020, Accor filed an Amended Answer and Counterclaims against Ashford TRS Chicago II, in which Accor asserted two causes of action: First, Accor asserted a counterclaim for declaratory judgment that Accor correctly calculated the amount payable to Ashford TRS Chicago II under the Accor management agreement to “cure” Accor’s performance test failure (the “Cure Amount”).
Added
The complaint includes claims for unpaid wages, meal and rest break violations, and unreimbursed business expenses, along with various derivative claims including wage statement, final pay, and PAGA claims. On November 30, 2023, Hilton mediated this litigation, but it did not result in a settlement.
Removed
Second, Accor asserted a counterclaim for breach of contract alleging that Ashford TRS Chicago II breached the Accor 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.
Added
During the quarter ended September 30, 2023, we had a cyber incident that resulted in the potential exposure of certain employee personal information. We have completed an investigation and have identified certain employee information that may have been exposed, but we have not identified that any customer information was exposed. All systems have been restored.
Removed
On February 16, 2022, the parties entered into a settlement agreement agreeing to: 1) amend the Accor 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.
Added
We believe that we maintain a sufficient level of insurance coverage related to such events, and the related incremental costs incurred to date are immaterial. In February of 2024, two class action lawsuits were filed related to the cyber incident. The suits are currently pending in the U.S. District Court for the Northern District of Texas.
Removed
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. Arbitration occurred on October 12 and 13, 2022.
Added
We intend to vigorously defend these matters and do not believe that any potential loss is reasonably estimable at this time. It is reasonably possible that the Company may incur additional costs related to the matter, but we are unable to predict with certainty the ultimate amount or range of potential loss.
Removed
The arbitrator returned his decision on November 21, 2022, and the decision did not result in any additional amounts being owed to, or payable by, the Company.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

17 edited+0 added−5 removed7 unchanged
Biggest changeDistributions paid per share were characterized as follows: 2022 2021 2020 Amount % Amount % Amount % Common Stock (cash): Ordinary taxable dividend $ 0.0300 (1) 100.0000 % $ — — % $ — — % Capital gain distribution — — — — — — Unrecaptured 1250 gain — — — — — — Return of capital — — — — 0.1600 (1) 100.0000 Total $ 0.0300 100.0000 % $ — — % $ 0.1600 100.0000 % Preferred Stock – Series B: Ordinary taxable dividend $ 1.3752 (1) 100.0000 % $ — — % $ — — % Capital gain distribution — — — — — — Unrecaptured 1250 gain — — — — — — 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 taxable dividend $ 2.0624 (1) 100.0000 % $ — — % $ — — % Capital gain distribution — — — — — — Unrecaptured 1250 gain — — — — — — Return of capital — — 2.0624 (1) 100.0000 2.0624 (1) 100.0000 Total $ 2.0624 100.0000 % $ 2.0624 100.0000 % $ 2.0624 100.0000 % Preferred Stock – Series E: Ordinary taxable dividend $ 1.9732 (1) (2) 100.0000 % — — — — Capital gain distribution — — — — — — Unrecaptured 1250 gain — — — — — — Return of capital — — 0.8330 (1) 100.0000 — — Total $ 1.9732 100.0000 % $ 0.8330 100.0000 % $ — — % Preferred Stock – Series M (CUSIP #10482B705): Ordinary taxable dividend 2.0621 (1) (2) 100.0000 % — — — — Capital gain distribution — — — — — — Unrecaptured 1250 gain — — — — — — Return of capital — 0.6832 (1) 100.0000 — — Total $ 2.0621 100.0000 % $ 0.6832 100.0000 % $ — — % Preferred Stock – Series M (CUSIP #10482B887): Ordinary taxable dividend 2.0538 (1) (2) 100.0000 % — — — — Capital gain distribution — — — — — — Unrecaptured 1250 gain — — — — — — Return of capital — — 0.6832 (1) 100.0000 — — Total $ 2.0538 100.0000 % $ 0.6832 100.0000 % $ — — % Preferred Stock – Series M (CUSIP #10482B796, 10482B861, 10482B770 and 10482B846): Ordinary taxable dividend 1.8788 (1) (2) 100.0000 % — — — — Capital gain distribution — — — — — — Unrecaptured 1250 gain — — — — — — Return of capital — — — — — — Total $ 1.8788 100.0000 % $ — — % $ — — % ____________________ (1) 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.
Biggest changeDistributions paid per share were characterized as follows: 2023 2022 2021 Amount % Amount % Amount % Common Stock (cash): Ordinary taxable dividend $ — — % $ 0.0300 100.0000 % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 0.2000 100.0000 % — — % — — % Total $ 0.2000 (1) 100.0000 % $ 0.0300 (1) 100.0000 % $ — — % Preferred Stock – Series B: Ordinary taxable dividend $ 0.1781 12.9534 % $ 1.3752 100.0000 % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % 83 2023 2022 2021 Amount % Amount % Amount % Return of capital $ 1.1971 87.0466 % — — % $ 1.3752 100.0000 % Total $ 1.3752 (1) 100.0000 % $ 1.3752 (1) 100.0000 % $ 1.3752 (1) 100.0000 % Preferred Stock – Series D: Ordinary taxable dividend $ 0.2672 12.9534 % $ 2.0624 100.0000 % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.7952 87.0466 % — — % $ 2.0624 100.0000 % Total $ 2.0624 (1) 100.0000 % $ 2.0624 (1) 100.0000 % $ 2.0624 (1) 100.0000 % Preferred Stock – Series E: Ordinary taxable dividend $ 0.2476 12.9534 % $ 1.9732 100.0000 % — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.6637 87.0466 % — — % $ 0.8330 100.0000 % Total $ 1.9113 (1) (3) 100.0000 % $ 1.9732 (1) (2) 100.0000 % $ 0.8330 (1) 100.0000 % Preferred Stock – Series M (CUSIP #10482B705): Ordinary taxable dividend $ 0.2701 12.9534 % $ 2.0621 100.0000 % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.8152 87.0466 % — — % $ 0.6832 100.0000 % Total $ 2.0853 (1) (3) 100.0000 % $ 2.0621 (1) (2) 100.0000 % $ 0.6832 (1) 100.0000 % Preferred Stock – Series M (CUSIP #10482B887): Ordinary taxable dividend $ 0.2693 12.9534 % $ 2.0538 100.0000 % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.8098 87.0466 % — — % $ 0.6832 100.0000 % Total $ 2.0791 (1) (3) 100.0000 % $ 2.0538 (1) (2) 100.0000 % $ 0.6832 (1) 100.0000 % Preferred Stock – Series M (CUSIP #10482B796): Ordinary taxable dividend $ 0.2685 12.9534 % $ 1.8788 100.0000 % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.8043 87.0466 % — — % — — % Total $ 2.0728 (1) (3) 100.0000 % $ 1.8788 (1) (2) 100.0000 % $ — — % Preferred Stock – Series M (CUSIP 10482B861) Ordinary taxable dividend $ 0.2677 12.9534 % — — % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.7989 87.0466 % — — % — — % Total $ 2.0666 (1) (3) 100.0000 % $ — — % $ — — % Preferred Stock – Series M (CUSIP 10482B770) Ordinary taxable dividend $ 0.2669 12.9534 % — — % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.7934 87.0466 % — — % — — % Total $ 2.0603 (1) (3) 100.0000 % $ — — % $ — — % Preferred Stock – Series M (CUSIP 10482B846) Ordinary taxable dividend $ 0.2661 12.9534 % — — % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.7879 87.0466 % — — % — — % Total $ 2.0540 (1) (3) 100.0000 % $ — — % $ — — % Preferred Stock – Series M (CUSIP 10482B820) Ordinary taxable dividend $ 0.2433 12.9534 % — — % $ — — % Capital gain distribution — — % — — % — — % Unrecaptured 1250 gain — — % — — % — — % Return of capital $ 1.6356 87.0466 % — — % — — % Total $ 1.8789 (1) (3) 100.0000 % $ — — % $ — — % ____________________ (1) The fourth quarter 2020 distributions paid January 15, 2021 to stockholders of record as of December 31, 2020 are treated as 2021 distributions for tax purposes.
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 83 (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).
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).
The Company expects to pay a quarterly cash dividend of $0.05 per share for the Company’s common stock for 2023, or $0.20 per share on an annualized basis. 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 Company expects to pay a quarterly cash dividend of $0.05 per share for the Company’s common stock for 2024, or $0.20 per share on an annualized basis. 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 number of shares subject to issuance under the PSUs (if any) will depend on the ultimate actual performance level, and the Company in its discretion may settle the 2022 PSUs in cash rather than shares of common stock.
The number of shares subject to issuance under the PSUs (if any) will depend on the ultimate actual performance level, and the Company in its discretion may settle the 2023 PSUs in cash rather than shares of common stock.
The board will continue to review its dividend policy on a quarter-to-quarter basis.
The board of directors will continue to review its dividend policy on a quarter-to-quarter basis.
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, 2023, there were 601 holders of record.
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 12, 2024, there were 572 holders of record.
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) Weighted-Average Exercise Price Of Outstanding Options, Warrants, And Rights Number of Securities Remaining Available for Future Issuance Equity compensation plans approved by security holders 972,728 N/A 1,469,068 (2) Equity compensation plans not approved by security holders None N/A None Total 972,728 N/A 1,469,068 ____________________ (1) Consists of rights to acquire our common stock subject to the satisfaction of service and or performance vesting conditions (with the amount shown assuming the maximum level of performance under the 2021 and 2022 PSU awards).
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) Weighted-Average Exercise Price Of Outstanding Options, Warrants, And Rights Number of Securities Remaining Available for Future Issuance Equity compensation plans approved by security holders 848,168 N/A 1,613,606 (2) Equity compensation plans not approved by security holders None N/A None Total 848,168 N/A 1,613,606 ____________________ (1) Consists of rights to acquire our common stock subject to the satisfaction of service and or performance vesting conditions (with the amount shown assuming the maximum level of performance under the 2022 and 2023 PSU awards).
(2) Distributions per share reflects the annual rate per share for distributions reportable in 2022. 85 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.
(3) Distributions per share reflects the annual rate per share for distributions reportable in 2023. 84 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.
The fourth quarter 2020 distributions paid January 15, 2021 to stockholders of 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.
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. The distributions paid January 17, 2023 to stockholders of record as of December 30, 2022 are treated as 2023 distributions for tax purposes.
In addition, our charter allows us to issue preferred stock that could have a preference on distributions, and, if we elect such issuance, the distribution preference on the preferred stock could limit our ability to make distributions to the holders of our common stock.
In addition, our charter allows us to issue preferred stock that could have a preference on distributions, and, if we elect such issuance, the 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.
(2) As of December 31, 2022, approximately 1,469,000 shares of our common stock, or securities convertible into approximately 1.5 million shares of our common stock, remained available for issuance under our 2013 Equity Incentive Plan.
(2) As of December 31, 2023, approximately 1,613,606 shares of our common stock, or securities convertible into approximately 1.6 million shares of our common stock, remained available for issuance under our 2013 Equity Incentive Plan.
Distributions and Our Distribution Policy The board of directors declared cash dividends on the Company’s 5.5% Series B Cumulative Convertible Preferred Stock, 8.25% Series D Cumulative Preferred Stock, Series E Redeemable Preferred Stock and Series M Redeemable Preferred Stock for the quarters ending March 30, 2022, June 30, 2022, September 30, 2022, December 31, 2022 and March 31, 2023 in amounts that such holders of our preferred stock are entitled to received.
Distributions and Our Distribution Policy The board of directors declared cash dividends on the Company’s 5.5% Series B Cumulative Convertible Preferred Stock, 8.25% Series D Cumulative Preferred Stock, Series E Redeemable Preferred Stock and Series M Redeemable Preferred Stock for each quarter of 2023 in amounts that such holders of our preferred stock are entitled to receive.
On December 8, 2022, our board of directors increased the quarterly cash dividend from $0.01 per diluted share to $0.05 per diluted share beginning with the Company’s common stock dividend for the fourth quarter of 2022 and approved the Company’s dividend policy for 2023.
Our board of directors declared quarterly cash dividends of $0.05 per diluted share for the Company’s common stock for each quarter of 2023. On December 5, 2023, our board of directors approved the Company’s dividend policy for 2024.
During the year ended December 31, 2022, we repurchased 1.5 million shares of our common stock for approximately $6.1 million. Subsequent to December 31, 2022, the Company repurchased approximately 3.9 million shares of its common stock for approximately $18.9 million.
During the year ended December 31, 2023, we repurchased 3.9 million shares of our common stock for approximately $18.9 million. As of December 31, 2023, the Company has completed the $25.0 million repurchase authorization.
The distributions paid January 17, 2023 to stockholders of record as of December 30, 2022 are treated as 2023 distributions for tax purposes.
The fourth quarter 2023 distributions paid January 16, 2024 to stockholders of record as of December 29, 2023 are treated as 2024 distributions for tax purposes. (2) Distributions per share reflects the annual rate per share for distributions reportable in 2022.
(2) There is no cost associated with the forfeiture of restricted shares of 12,597 and 342 of our common stock in October and November, respectively. 86 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, 2017 through December 31, 2022, assuming an initial investment of $100 in stock on December 31, 2016 with reinvestment of dividends.
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, 2023: Period 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 Common stock: October 1 to October 31 — $ — — November 1 to November 30 — $ — — December 1 to December 31 — $ — — Total — $ — — 85 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, 2018 through December 31, 2023, assuming an initial investment of $100 in stock on December 31, 2018 with reinvestment of dividends.
We cannot assure our stockholders that our distribution policy will not change in the future. 84 Characterization of Distributions For income tax purposes, distributions paid consist of ordinary income or capital gains.
Characterization of Distributions For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof.
Removed
We did not pay dividends on our common stock in fiscal years 2020 and 2021. 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.
Removed
Our board of directors declared a quarterly cash dividend of $0.01 per diluted share for the Company’s common stock for the quarters ended March 30, 2022, June 30, 2022 and September 30, 2022.
Removed
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.
Removed
The Company repurchased approximately 5.4 million shares of its common stock for approximately $25.0 million and has completed the $25.0 million repurchase authorization.
Removed
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, 2022: Period 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 Common stock: October 1 to October 31 12,597 $ — (2) — $ 50,000,000 November 1 to November 30 342 $ — (2) — $ 50,000,000 December 1 to December 31 1,524,346 (1) $ 4.04 1,511,044 $ 18,897,710 Total 1,537,285 $ 4.04 1,511,044 __________________ (1) Includes 13,302 shares in December that were withheld to cover tax-withholding requirements related to the vesting of restricted shares of our common stock issued to employees of our advisor pursuant to the Company’s stockholder-approved stock incentive plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+61 added−55 removed72 unchanged
Biggest changeEBITDA, 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. 101 The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited): Year Ended December 31, 2022 2021 2020 Net income (loss) $ 19,348 $ (32,911) $ (124,677) Interest expense and amortization of loan costs 52,166 30,901 45,104 Depreciation and amortization 78,122 73,762 73,371 Income tax expense (benefit) 4,043 1,324 (4,406) Equity in (earnings) loss of unconsolidated entity 328 252 217 Company’s portion of EBITDA of OpenKey (334) (250) (214) EBITDA 153,673 73,078 (10,605) (Gain) loss on insurance settlement and disposition of assets — (696) (10,149) EBITDAre 153,673 72,382 (20,754) Amortization of favorable (unfavorable) contract assets (liabilities) 463 512 834 Transaction and conversion costs 9,679 2,637 1,370 Other (income) expense (497) — 5,126 Write-off of loan costs and exit fees 146 1,963 3,920 (Gain) loss on insurance settlements (55) — — Unrealized (gain) loss on derivatives (4,464) (32) (4,959) Stock/unit-based compensation 11,285 10,204 7,892 Legal, advisory and settlement costs 2,170 (208) 2,023 Company’s portion of adjustments to EBITDAre of OpenKey 8 7 13 Adjusted EBITDAre $ 172,408 $ 87,465 $ (4,535) 102 The following table reconciles net income (loss) to EBITDA attributable to the Company and OP unitholders on a property-by-property basis for each of our hotel properties owned and on a corporate basis during the year ended December 31, 2022.
Biggest changeThe following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited): Year Ended December 31, 2023 2022 2021 Net income (loss) $ (30,628) $ 19,348 $ (32,911) Interest expense and amortization of loan costs 94,219 52,166 30,901 Depreciation and amortization 93,272 78,122 73,762 Income tax expense (benefit) 2,689 4,043 1,324 Equity in (earnings) loss of unconsolidated entity 253 328 252 Company’s portion of EBITDA of OpenKey (274) (334) (250) EBITDA 159,531 153,673 73,078 (Gain) loss on insurance settlement and disposition of assets — — (696) EBITDAre 159,531 153,673 72,382 Amortization of favorable (unfavorable) contract assets (liabilities) 474 463 512 Transaction and conversion costs 4,561 9,679 2,637 Write-off of premiums, loan costs and exit fees 3,489 146 1,963 Realized and unrealized (gain) loss on derivatives 663 (4,961) (32) Stock/unit-based compensation 9,244 11,285 10,204 Legal, advisory and settlement costs 1,397 2,170 (208) (Gain) loss on extinguishment of debt (2,318) — — Other (income) expense (293) — — (Gain) loss on insurance settlements — (55) — Company’s portion of adjustments to EBITDAre of OpenKey — 8 7 Adjusted EBITDAre $ 176,748 $ 172,408 $ 87,465 101 The following table reconciles net income (loss) to EBITDA attributable to the Company and OP unitholders on a property-by-property basis for each of our hotel properties owned and on a corporate basis during the year ended December 31, 2023 (in thousands) (unaudited): Year Ended December 31, 2023 Capital Hilton Hilton La Jolla Torrey Pines Sofitel Chicago Magnificent Mile Bardessono Hotel and Spa Pier House Resort & Spa Hotel Yountville Park Hyatt Beaver Creek Resort & Spa The Notary Hotel The Clancy The Ritz-Carlton Sarasota The Ritz-Carlton Lake Tahoe Marriott Seattle Waterfront The Ritz-Carlton St.
Net Cash Flows Provided by Financing Activities. For the year ended December 31, 2022, net cash flows provided by financing activities were $345.1 million. Cash inflows primarily consisted of debt borrowings of $170.5 million, $278.6 million from the issuance of preferred stock and $167,000 of proceeds from in-the-money interest rate caps.
For the year ended December 31, 2022, net cash flows provided by financing activities were $345.1 million. Cash inflows primarily consisted of debt borrowings of $170.5 million, $278.6 million from the issuance of preferred stock and $167,000 of proceeds from in-the-money interest rate caps.
Our calculation of Adjusted FFO excludes 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, stock/unit-based compensation, gain/loss on insurance settlements and non-cash items such as deemed dividends on redeemable preferred stock, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives and the Company’s portion of adjustments to FFO of OpenKey.
Our calculation of Adjusted FFO excludes transaction and conversion costs, other income/expense, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, stock/unit-based compensation, gain/loss on insurance settlements, gain/loss on extinguishment of debt, and non-cash items such as deemed dividends on redeemable preferred stock, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives and the Company’s portion of adjustments to FFO of OpenKey.
See “Non-GAAP Financial Measures.” 89 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.
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.
We consider all available positive and negative evidence, including historical results of operations, projected future taxable income, carryback potential and scheduled 99 reversals of deferred tax liabilities. In evaluating the objective evidence that historical results provide, we consider three years of consolidated cumulative operating income (loss).
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).
Cash flows from operations are also impacted by the timing of working capital cash flows such as collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties and settling with hotel managers. 98 Net Cash Flows Provided by (Used in) Investing Activities .
Cash flows from operations are also impacted by the timing of working capital cash flows, such as collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties and settling with hotel managers. Net Cash Flows Provided by (Used in) Investing Activities .
(2) Includes allocated amounts which were not specific to hotel properties, such as gain on sale of hotel property, corporate taxes, insurance and legal expenses. 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.
(2) Includes allocated amounts which were not specific to hotel properties, such as gain on sale of hotel property, corporate taxes, insurance and legal expenses. 104 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.
While the industry is 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.
While the industry is 88 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.
At December 31, 2022, Braemar Hotels & Resorts Inc., our REIT, had net operating loss carryforwards for U.S. federal income tax purposes of $109.7 million based on the latest filed tax return. Of this amount, $2.2 million is subject to expiration in in 2033. The remainder is not subject to expiration under the Tax Cuts and Jobs Act.
At December 31, 2023, Braemar Hotels & Resorts Inc., our REIT, had net operating loss carryforwards for U.S. federal income tax purposes of $109.7 million based on the latest filed tax return. Of this amount, $2.2 million is subject to expiration in 2033. The remainder is not subject to expiration under the Tax Cuts and Jobs Act.
In January 2021, the FASB issued 2021-01, Reference Rate Reform (Topic 848), Scope , which further clarified the scope of the reference rate reform optional practical expedients and exceptions outlined in Topic 848.
In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848), which further clarified the scope of the reference rate reform optional practical expedients and exceptions outlined in Topic 848.
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.
If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects could be materially and adversely affected. Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties declines.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 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, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 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, 2022.
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.
While management cannot provide any assurances, management believes that our cash flow from operations and our existing cash balances will be adequate to meet upcoming anticipated requirements for interest and principal payments on debt (excluding any potential final maturity principal payments and paydowns for extension tests), working capital, and capital expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S. federal income tax purposes.
Based on when a hotel property was acquired or disposed of, the operating results for certain hotel properties are not comparable for the years ended December 31, 2022 and 2021. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties.
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, 2023 and 2022. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties.
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.
In addition, we exclude impairment on real estate, (gain) loss on insurance settlement and disposition of assets and Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by NAREIT.
We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business.
We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because they provide investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business.
We 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, gain/loss on insurance settlements, legal, advisory and settlement costs, advisory services incentive fee, other/income expense, stock/unit-based compensation and the Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/ loss on derivatives.
We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable) contract assets (liabilities), transaction and conversion costs, other income/expense, write-off of loan costs and exit fees, gain/ 100 loss on insurance settlements, advisory and settlement costs, advisory services incentive fee, gain/loss on extinguishment of debt, stock/unit-based compensation and the Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/ loss on derivatives.
C Beverly Hills Hotel are included from its acquisition date through December 31, 2021 (in thousands) (unaudited): Year Ended December 31, 2021 Capital Hilton Hilton La Jolla Torrey Pines Sofitel Chicago Magnificent Mile Bardessono Hotel and Spa Pier House Resort & Spa Hotel Yountville Park Hyatt Beaver Creek Resort & Spa The Notary Hotel The Clancy The Ritz-Carlton Sarasota The Ritz-Carlton Lake Tahoe Marriott Seattle Waterfront The Ritz-Carlton St.
The results of the Cameo Beverly Hills are included from its acquisition date through December 31, 2021 (in thousands) (unaudited): Year Ended December 31, 2021 Capital Hilton Hilton La Jolla Torrey Pines Sofitel Chicago Magnificent Mile Bardessono Hotel and Spa Pier House Resort & Spa Hotel Yountville Park Hyatt Beaver Creek Resort & Spa The Notary Hotel The Clancy The Ritz-Carlton Sarasota The Ritz-Carlton Lake Tahoe Marriott Seattle Waterfront The Ritz-Carlton St.
Two times the U.S. national average was $187 for the year ended December 31, 2022. 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.
Two times the U.S. national average was $196 for the year ended December 31, 2023. 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.
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.
The loss carry forwards subject to expiration may be available to offset future taxable income, if any, for 2024 through 2034, with 99 the remainder available to offset taxable income beyond 2034; however, there could be substantial limitations on their use imposed by the Code.
In 2022, we recorded an advisory services fee of $28.8 million, which included a base advisory fee of $12.8 million, reimbursable expenses of $4.7 million, $10.6 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and an incentive fee of $803,000.
In 2022, we recorded an advisory services fee of $28.8 million, which included a base advisory fee of $12.8 million, reimbursable expenses of $4.7 million, $10.6 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and an incentive fee of $803,000. Gain on Legal Settlements.
On December 7, 2022, our board of directors approved a new 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 $25 million. The board of director’s authorization replaced any previous repurchase authorizations.
Equity Transactions On December 7, 2022, our board of directors approved a new 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 $25 million. The board of directors’ authorization replaced any previous repurchase authorizations.
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 2018 through 2022 remain subject to potential examination by certain federal and state taxing authorities.
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 2019 through 2023 remain subject to potential examination by certain federal and state taxing authorities.
We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.
We also believe they help investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.
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.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations, capital market activities, our Revolving Credit Facility, asset sales and existing cash balances. 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.
Thomas Mr. C. Beverly Hills Hotel The Ritz-Carlton Dorado Beach Four seasons Resort Scottsdale Hotel Total Corporate / Allocated (1) Braemar Hotels & Resorts Inc.
Thomas Cameo Beverly Hills The Ritz-Carlton Dorado Beach Four Seasons Resort Scottsdale Hotel Total Corporate / Allocated (1) Braemar Hotels & Resorts Inc.
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 14 of our hotel properties directly, and the remaining two hotel properties through an investment in a majority-owned consolidated entity.
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 14 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 through an advisory agreement.
At December 31, 2022 and 2021, we had a valuation allowance of approximately $18.6 million and $17.3 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.
At December 31, 2023 and 2022, we had a valuation allowance of approximately $16.2 million and $18.6 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.
As of December 31, 2022, we owned interests in 16 hotel properties in seven states, the District of Columbia, Puerto Rico and St. Thomas, U.S. Virgin Islands with 4,181 total rooms, or 3,946 net rooms, excluding those attributable to our joint venture partner.
As of December 31, 2023, we owned interests in 16 hotel properties in seven states, the District of Columbia, Puerto Rico and St. Thomas, U.S. Virgin Islands with 4,192 total rooms, or 3,957 net rooms, excluding those attributable to our joint venture partner.
As of March 8, 2023, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.
As of March 12, 2024, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.
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.
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 one mortgage loan, as discussed below.
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 years ended December 31, 2022, 2021 and 2020. Income Taxes.
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 were no impairment charges recorded for the years ended December 31, 2023, 2022 and 2021. Income Taxes.
See “Forward-Looking Statements.” 87 This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
See “Forward-Looking Statements.” 86 This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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, 2022, Remington Hotels, a subsidiary of Ashford Inc., managed four of our 16 hotel properties. Third-party management companies managed the remaining hotel properties.
We do not operate any of our hotel properties directly; instead we contractually engage hotel management companies to operate them for us under management contracts. As of December 31, 2023, Remington Hospitality , a subsidiary of Ashford Inc., managed four of our 16 hotel properties. Third-party management companies managed the remaining hotel properties.
As of March 8, 2023, the Company has issued approximately 16.4 million shares of Series E Preferred Stock and received net proceeds of approximately $369.5 million and issued approximately 2.0 million shares of Series M Preferred Stock and received net proceeds of approximately $47.6 million.
The Company issued approximately 16.4 million shares of Series E Preferred Stock and received net proceeds of approximately $369.5 million and issued approximately 2.0 million shares of Series M Preferred Stock and received net proceeds of approximately $47.6 million.
LIQUIDITY AND CAPITAL RESOURCES Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including: • recurring maintenance necessary to maintain our hotel properties in accordance with brand standards; • interest expense and scheduled principal payments on outstanding indebtedness; 95 • 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; • capital expenditures to improve our hotel properties; and • advisory fees payable to Ashford LLC.
LIQUIDITY AND CAPITAL RESOURCES Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including: • advisory fees payable to Ashford LLC; • recurring maintenance necessary to maintain our hotel properties in accordance with brand standards; • interest expense and scheduled principal payments on outstanding indebtedness; • dividends on our common stock; 94 • dividends on our preferred stock; and • capital expenditures to improve our hotel properties.
The amendments in ASU Nos. 2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge effectiveness in hedging relationships that have been modified to replace a reference rate. The Company applied the optional expedient in evaluating debt modifications converting from LIBOR to SOFR.
The amendments in ASU Nos. 2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge effectiveness in hedging relationships that have been modified to replace a reference rate.
We anticipate using funds to pay for capital expenditures for our 16 hotel properties, estimated to be approximately $80.0 million in fiscal year 2023 and debt interest payments, estimated to be approximately $80.8 million in 2023 based on future payments using the one month LIBOR/SOFR rate as of December 31, 2022.
We anticipate using funds to pay for capital expenditures for our 16 hotel properties, estimated to be approximately $90 to $100 million in fiscal year 2024 and debt interest payments, estimated to be approximately $89.6 million in 2024 based on future payments using the one month SOFR rate as of December 31, 2023.
This estimate will fluctuate based on changes in the one-month LIBOR/SOFR rate and any future changes in outstanding indebtedness. Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities were $109.5 million and $64.0 million for the twelve months ended December 31, 2022 and 2021, respectively.
This estimate will fluctuate based on changes in the one-month SOFR rate and any future changes in outstanding indebtedness. Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities were $84.7 million and $109.5 million for the years ended December 31, 2023 and 2022, respectively.
The following table presents the amounts of the adjustments for noncontrolling interests for each line item: Year Ended December 31, 2022 2021 2020 Depreciation and amortization on real estate $ (2,614) $ (2,690) $ (2,945) Amortization of loan costs (91) (87) (77) 107
The following table presents the amounts of the adjustments for noncontrolling interests for each line item: Year Ended December 31, 2023 2022 2021 Depreciation and amortization on real estate $ (3,241) $ (2,614) $ (2,690) Amortization of loan costs (94) (91) (87) 106
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.
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.
These cash outflows were primarily attributable to $49.1 million of capital improvements made to various hotel properties, approximately $354.4 million associated with the acquisition of The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale and additional investments in OpenKey of $328,000, partially offset by cash inflows of $1.7 million associated with an amendment to a hotel management agreement.
These cash outflows were primarily attributable to $49.1 million of capital improvements made to various hotel properties, approximately $354.4 million associated with the acquisitions of The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale and additional investments in OpenKey of $328,000, partially offset by cash inflows of $1.7 million associated with an amendment to a hotel management agreement. 98 Our capital improvements consisted of approximately $28.0 million of return on investment capital projects and approximately $21.2 million of renewal and replacement capital projects.
Net income (loss) attributable to the Company changed $44.4 million, from a net loss of $26.7 million for the year ended December 31, 2021 (“2021”), to net income of $17.8 million for the year ended December 31, 2022 (“2022”), as a result of the factors discussed below. Rooms Revenue .
Net income (loss) attributable to the Company changed $44.8 million, from net income of $17.8 million for the year ended December 31, 2022 (“2022”), to a net loss of $27.0 million for the year ended December 31, 2023 (“2023”), as a result of the factors discussed below. Rooms Revenue .
During 2022, the funding estimate to Ashford Securities was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities that resulted in additional expense of approximately $7.2 million. Gain (loss) on Insurance Settlement and Disposition of Assets .
During 2022, the funding estimate to Ashford Securities was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities that resulted in additional expense of approximately $7.2 million. Equity in Earnings (Loss) of Unconsolidated Entity .
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, 2022 2021 2020 Net income (loss) $ 19,348 $ (32,911) $ (124,677) (Income) loss attributable to noncontrolling interest in consolidated entities (2,063) 2,650 6,436 Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership 476 3,597 12,979 Preferred dividends (21,503) (8,745) (10,219) Deemed dividends on preferred stock (6,954) — — Gain (loss) on extinguishment of preferred stock — (4,595) — Net income (loss) attributable to common stockholders (10,696) (40,004) (115,481) Depreciation and amortization on real estate (1) 75,508 71,072 70,426 Net income (loss) attributable to redeemable noncontrolling interests in operating partnership (476) (3,597) (12,979) Equity in (earnings) loss of unconsolidated entity 328 252 217 (Gain) loss on insurance settlement and disposition of assets — (696) (10,149) Company’s portion of FFO of OpenKey (333) (251) (216) FFO available to common stockholders and OP unitholders 64,331 26,776 (68,182) Deemed dividends on preferred stock 6,954 — — (Gain) loss on extinguishment of preferred stock — 4,595 — Transaction and conversion costs 9,679 2,637 1,370 Other (income) expense — — 5,126 Interest expense accretion on refundable membership club benefits 723 772 818 Write-off of loan costs and exit fees 146 1,963 3,920 Amortization of loan costs (1) 2,365 2,121 3,332 (Gain) loss on insurance settlements (55) — — Unrealized (gain) loss on derivatives (4,464) (32) (4,959) Stock/unit-based compensation 11,285 10,204 7,892 Legal, advisory and settlement costs 2,170 (208) 2,023 Company’s portion of adjustments to FFO of OpenKey 8 7 13 Adjusted FFO available to common stockholders and OP unitholders 93,142 48,835 $ (48,647) ____________________ (1) Net of adjustment for noncontrolling interest in consolidated entities.
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. 105 The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited): Year Ended December 31, 2023 2022 2021 Net income (loss) $ (30,628) $ 19,348 $ (32,911) (Income) loss attributable to noncontrolling interest in consolidated entities (1,619) (2,063) 2,650 Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership 5,230 476 3,597 Preferred dividends (42,304) (21,503) (8,745) Deemed dividends on preferred stock (4,719) (6,954) — Gain (loss) on extinguishment of preferred stock — — (4,595) Net income (loss) attributable to common stockholders (74,040) (10,696) (40,004) Depreciation and amortization on real estate (1) 90,031 75,508 71,072 Net income (loss) attributable to redeemable noncontrolling interests in operating partnership (5,230) (476) (3,597) Equity in (earnings) loss of unconsolidated entity 253 328 252 (Gain) loss on insurance settlement and disposition of assets — — (696) Company’s portion of FFO of OpenKey (296) (333) (251) FFO available to common stockholders and OP unitholders 10,718 64,331 26,776 Deemed dividends on preferred stock 4,719 6,954 — (Gain) loss on extinguishment of preferred stock — — 4,595 Transaction and conversion costs 4,561 9,679 2,637 Write-off of premiums, loan costs and exit fees 3,489 146 1,963 Unrealized (gain) loss on derivatives 8,413 (4,464) (32) Stock/unit-based compensation 9,244 11,285 10,204 Legal, advisory and settlement costs 1,397 2,170 (208) Interest expense accretion on refundable membership club deposits 671 723 772 Amortization of loan costs 3,289 2,365 2,121 (Gain) loss on extinguishment of debt (2,318) — — Other (income) expense (293) — — (Gain) loss on insurance settlements — (55) — Company’s portion of adjustments to FFO of OpenKey — 8 7 Adjusted FFO available to common stockholders and OP unitholders $ 43,890 $ 93,142 $ 48,835 ____________________ (1) Net of adjustment for noncontrolling interest in consolidated entities.
At both December 31, 2022 and 2021, 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 $476,000 in 2022 and $3.6 million in 2021.
Our noncontrolling interest partner in consolidated entities was allocated income of $1.6 million and $2.1 million in 2023 and 2022, respectively. At both December 31, 2023 and 2022, 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.
Realized and Unrealized gain on derivatives of $5.0 million for 2022 consisted of unrealized gains of approximately $3.8 million on interest rate caps and approximately $1.2 million on warrants and realized gains of $497,000 associated with payments received from counterparties on interest rate caps.
Realized and Unrealized gain on derivatives of $5.0 million for 2022 consisted of an unrealized gain of approximately $3.3 million on interest rate caps, an unrealized gain of approximately $1.2 million on warrants and a realized gain of $497,000 associated with payments received from counterparties on in-the-money interest rate caps. Income Tax (Expense) Benefit .
At December 31, 2022, we had TRS net operating loss carry forwards for U.S. federal income tax purposes of $68.5 million, of which $50.7 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.
At December 31, 2023, we had TRS net operating loss carry forwards for U.S. federal income tax purposes of $63.6 million, of which $47.3 million is subject to expiration and began expiring in 2024. The remainder was generated after December 31, 2017 and is not subject to expiration under the Tax Cuts and Jobs Act.
Hotel operating expenses consist of direct expenses from departments associated with revenue streams and 93 indirect expenses associated with support departments and incentive management fees. We experienced an increase of $8.0 million in direct expenses and $58.4 million in indirect expenses and incentive management fees in 2022 compared to 2021.
Other operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. We experienced an increase of $3.0 million in direct expenses and $19.5 million in indirect expenses and incentive management fees in 2023 compared to 2022.
Cash flows from operations were impacted by changes in hotel operations of our 13 comparable hotel properties as well as the acquisitions of the Mr. C Beverly Hills Hotel on August 5, 2021, The Ritz-Carlton Reserve Dorado Beach on March 11, 2022 and the Four Seasons Resort Scottsdale on December 1, 2022.
Cash flows from operations were impacted by changes in hotel operations of our 14 comparable hotel properties, The Ritz-Carlton Reserve Dorado Beach, acquired on March 11, 2022, and the Four Seasons Resort Scottsdale, acquired on December 1, 2022.
The increase in corporate general and administrative expenses is primarily due to higher professional fees of $1.2 million, higher public company costs of $108,000, higher reimbursed operating expenses of Ashford Securities of $7.5 million and higher miscellaneous expenses of $572,000.
The decrease in corporate general and administrative expenses is primarily due to lower 93 reimbursed operating expenses of Ashford Securities of $5.1 million, lower miscellaneous expenses of $307,000 and lower public company costs of $271,000, partially offset by higher professional fees of $1.1 million.
As of December 31, 2022, we held extension options to extend the principal for all of the debt due in the next twelve months except for $189.5 million. As discussed in note 17 to our consolidated financial statements, under our operating leases we have current obligations of approximately $3.4 million and long-term obligations of approximately $154.6 million.
With respect to our indebtedness, as discussed in note 6 to our consolidated financial statements, we have current obligations of $582.8 million and long-term obligations of $590.3 million. As of December 31, 2023, we held extension options to extend the principal for all of the debt due in the next twelve months except for $219.1 million.
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. As of December 31, 2022, our $435 million mortgage loan was in a cash trap and approximately $298,000 of our restricted cash was subject to this cash trap.
Our loan that is in a cash trap may remain subject to the cash trap provisions for a substantial period of time which could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.
The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $24.6 million comprising an increase of $15.6 million at our 13 comparable hotel properties and $9.1 million at the three acquired hotel properties; (ii) marketing costs of $15.7 million comprising an increase of $11.5 million at our 13 comparable hotel properties and $4.2 million at the three acquired hotel properties; (iii) repairs and maintenance of $6.2 million comprising an increase of $2.5 million at our 13 comparable hotel properties and $3.7 million at the three acquired hotel properties; (iv) lease expense of $1.3 million comprising an increase of $1.1 million at our 13 comparable hotel properties and $250,000 at the three acquired hotel properties; (v) energy costs of $6.7 million comprised of an increase of $3.3 million at our 13 comparable hotel properties and $3.4 million at the three acquired hotel properties; and (vi) incentive management fees of $3.8 million comprising an increase of $2.9 million at our 13 comparable hotel properties and $888,000 at the three acquired hotel properties.
The increase in indirect expenses is attributable to increases in: (i) general and administrative costs of $6.6 million comprising of an increase of $7.0 million at the two acquired hotel properties, partially offset by a decrease of $413,000 at our 14 comparable hotel properties; (ii) marketing costs of $8.9 million comprising an increase of $3.6 million at our 14 comparable hotel properties and $5.3 million at the two acquired hotel properties; (iii) repairs and maintenance of $4.0 million comprising an increase of $544,000 at our 14 comparable hotel properties and $3.5 million at the two acquired hotel properties; (iv) lease expense of $103,000 comprising an increase of $170,000 at our 14 comparable hotel properties, partially offset by an aggregate decrease of $67,000 at the two acquired hotel properties; and (v) energy costs of $2.4 million comprised of an increase of $1.0 million at our 14 comparable hotel properties and $1.4 million at our two acquired hotel properties.
For the year ended December 31, 2022, net cash flows used in investing activities were $402.2 million.
For the year ended December 31, 2023, net cash flows used in financing activities were $156.8 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. (Gain) loss on legal settlements .
In 2023, we recorded an advisory services fee of $31.1 million, which included a base advisory fee of $14.0 million, reimbursable expenses of $8.4 million and $8.8 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.
In 2022 and 2021, we recorded equity in loss of unconsolidated entity of $328,000 and $252,000, respectively, related to our investment in OpenKey. Interest Income . Interest income was $2.7 million and $48,000 in 2022 and 2021, respectively. The increase in interest income was primarily related to higher cash balances and higher interest rates in 2022 compared to 2021.
In 2023 and 2022, we recorded equity in loss of unconsolidated entity of $253,000 and $328,000, respectively, related to our investment in OpenKey. Interest Income . Interest income was $6.4 million and $2.7 million in 2023 and 2022, respectively.
Advisory services fee increased $6.2 million, or 27.4%, to $28.8 million in 2022 compared to 2021 due to increases in the base advisory fee of $2.0 million, reimbursable expenses of $2.4 million, equity-based compensation of $1.1 million, and incentive fee of $803,000.
Advisory services fee increased $2.2 million, or 7.8%, to $31.1 million in 2023 compared to 2022 due to increases in reimbursable expenses of $3.7 million and base advisory fee of $1.2 million. These increases were partially offset by decreases in equity-based compensation of $1.8 million and incentive fee of $803,000.
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. During 2022, the Company received an additional payment of approximately $114,000 related to accrued interest on the initial settlement amount associated with the City of San Francisco transfer tax matter.
During 2022, the Company received an additional payment of approximately $114,000 related to accrued interest on the initial settlement amount associated with the City of San Francisco transfer tax matter. There was no such gain during 2023. Corporate General and Administrative . Corporate general and administrative expense was $13.5 million in 2023 compared to $18.1 million in 2022.
During the year ended December 31, 2022, we repurchased 1.5 million shares of our common stock for approximately $6.1 million. Subsequent to December 31, 2022, the Company repurchased approximately 3.9 million shares of its common stock for approximately $18.9 million.
During the year ended December 31, 2023, we repurchased 3.9 million shares of our common stock for approximately $18.9 million. As of December 31, 2023, the Company has completed the $25.0 million repurchase authorization.
This increase was primarily due to an increase in the profitability of our TRS entities in 2022 compared to 2021. (Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities . Our noncontrolling interest partner in consolidated entities was allocated income of $2.1 million and a loss of $2.7 million in 2022 and 2021, respectively.
Income tax expense decreased $1.4 million, from $4.0 million in 2022 to $2.7 million in 2023. This decrease was primarily due to a decrease in the taxable income of certain of our TRS entities in 2023 compared to 2022. (Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities .
The Company also issued approximately 68,000 shares of Series E Preferred Stock and approximately 4,000 shares of Series M Preferred Stock, respectively, pursuant to the dividend reinvestment plan. On February 21, 2023, the Company announced the closing of its offering of the Series E Preferred Stock and Series M Preferred Stock.
On February 21, 2023, the Company announced the closing of its offering of the Series E Preferred Stock and Series M Preferred Stock.
Critical Accounting Policies and Estimates Our accounting policies are fully described in note 2 to our consolidated financial statements included in “Item 8.
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 and Estimates Our accounting policies are fully described in note 2 to our consolidated financial statements included in “Item 8.
(2) Includes allocated amounts which were not specific to hotel properties, such as gain on sale of hotel property, corporate taxes, insurance and legal expenses. 104 The following table reconciles net income (loss) to EBITDA attributable to the Company and OP unitholders on a property-by-property basis for each of our hotel properties owned and on a corporate basis during the year ended December 31, 2020 (in thousands) (unaudited): Year Ended December 31, 2020 Capital Hilton Hilton La Jolla Torrey Pines Sofitel Chicago Magnificent Mile Bardessono Hotel and Spa Pier House Resort & Spa Hotel Yountville Park Hyatt Beaver Creek Resort & Spa The Notary Hotel The Clancy The Ritz-Carlton Sarasota The Ritz-Carlton Lake Tahoe Marriott Seattle Waterfront The Ritz-Carlton St.
(2) Includes allocated amounts which were not specific to hotel properties, such as gain on sale of hotel property, corporate taxes, insurance and legal expenses. 102 The following table reconciles net income (loss) to EBITDA attributable to the Company and OP unitholders on a property-by-property basis for each of our hotel properties owned and on a corporate basis during the year ended December 31, 2022.
Management Fees . Base management fees increased $7.0 million, or 53.6%, to $20.1 million in 2022 compared to 2021. Management fees increased approximately $4.9 million at 12 of our comparable hotel properties, $382,000 at the Mr. C Beverly Hills Hotel, $1.9 million at The Ritz-Carlton Reserve Dorado Beach and $157,000 at the Four Seasons Resort Scottsdale.
Base management fees increased $3.1 million, or 15.4%, to $23.3 million in 2023 compared to 2022. Management fees increased $2.1 million at six comparable hotel properties, $577,000 at The Ritz-Carlton Reserve Dorado Beach and $1.9 million at the Four Seasons Resort Scottsdale.
The impact on basic and diluted net loss per share of common stock attributable to common stockholders for the year ended December 31, 2022 was $(0.02). 100 In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provides optional guidance through December 31, 2022 to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting.
Recently Adopted Accounting Standards In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848 ) (“ASU 2020-04”), which provides optional guidance through December 31, 2022 to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting.
Thus, changes in ADR have a more significant impact on operating margins than changes in occupancy. 90 RESULTS OF OPERATIONS Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table summarizes changes in key line items from our consolidated statements of operations for the years ended December 31, 2022 and 2021 (in thousands except percentages): Year Ended December 31, Favorable (Unfavorable) 2022 2021 $ Change % Change Revenue Rooms $ 431,515 $ 280,568 $ 150,947 53.8 % Food and beverage 159,241 90,299 68,942 76.3 Other 78,829 56,675 22,154 39.1 Total hotel revenue 669,585 427,542 242,043 56.6 Expenses Hotel operating expenses: Rooms 94,410 59,818 (34,592) (57.8) Food and beverage 125,555 75,177 (50,378) (67.0) Other expenses 205,373 138,914 (66,459) (47.8) Management fees 20,149 13,117 (7,032) (53.6) Total hotel operating expenses 445,487 287,026 (158,461) (55.2) Property taxes, insurance and other 30,766 34,997 4,231 12.1 Depreciation and amortization 78,122 73,762 (4,360) (5.9) Advisory services fee 28,847 22,641 (6,206) (27.4) (Gain) loss on legal settlements (114) (917) (803) (87.6) Transaction costs — 563 563 100.0 Corporate general and administrative 18,084 8,717 (9,367) (107.5) Total expenses 601,192 426,789 (174,403) (40.9) Gain (loss) on insurance settlement and disposition of assets — 696 (696) (100.0) Operating income (loss) 68,393 1,449 66,944 (4,620.0) Equity in earnings (loss) of unconsolidated entity (328) (252) (76) (30.2) Interest income 2,677 48 2,629 5,477.1 Interest expense and amortization of discounts and loan costs (52,166) (30,901) (21,265) (68.8) Write-off of loan costs and exit fees (146) (1,963) 1,817 92.6 Realized and unrealized gain (loss) on derivatives 4,961 32 4,929 15,403.1 Income (loss) before income taxes 23,391 (31,587) 54,978 174.1 Income tax (expense) benefit (4,043) (1,324) (2,719) (205.4) Net income (loss) 19,348 (32,911) 52,259 158.8 (Income) loss attributable to noncontrolling interest in consolidated entities (2,063) 2,650 (4,713) (177.8) Net (income) loss attributable to redeemable noncontrolling interests in operating partnership 476 3,597 (3,121) (86.8) Net income (loss) attributable to the Company $ 17,761 $ (26,664) $ 44,425 166.6 % 91 All hotel properties owned for the years ended December 31, 2022 and 2021 have been included in our results of operations during the respective periods in which they were owned.
Thus, changes in ADR have a more significant impact on operating margins than changes in occupancy. 89 RESULTS OF OPERATIONS Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table summarizes changes in key line items from our consolidated statements of operations for the years ended December 31, 2023 and 2022 (in thousands except percentages): Year Ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Revenue Rooms $ 464,899 $ 431,515 $ 33,384 7.7 % Food and beverage 185,331 159,241 26,090 16.4 Other 89,113 78,829 10,284 13.0 Total hotel revenue 739,343 669,585 69,758 10.4 Expenses Hotel operating expenses: Rooms 105,439 94,410 (11,029) (11.7) Food and beverage 144,544 125,555 (18,989) (15.1) Other expenses 227,913 205,373 (22,540) (11.0) Management fees 23,261 20,149 (3,112) (15.4) Total hotel operating expenses 501,157 445,487 (55,670) (12.5) Property taxes, insurance and other 38,629 30,766 (7,863) (25.6) Depreciation and amortization 93,272 78,122 (15,150) (19.4) Advisory services fee 31,089 28,847 (2,242) (7.8) (Gain) loss on legal settlements — (114) (114) (100.0) Corporate general and administrative 13,523 18,084 4,561 25.2 Total expenses 677,670 601,192 (76,478) (12.7) Operating income (loss) 61,673 68,393 (6,720) (9.8) Equity in earnings (loss) of unconsolidated entity (253) (328) 75 22.9 Interest income 6,401 2,677 3,724 139.1 Other income (expense) 293 — 293 Interest expense and amortization of discounts and loan costs (94,219) (52,166) (42,053) (80.6) Write-off of loan costs and exit fees (3,489) (146) (3,343) (2,289.7) Gain (loss) on extinguishment of debt 2,318 — 2,318 Realized and unrealized gain (loss) on derivatives (663) 4,961 (5,624) (113.4) Income (loss) before income taxes (27,939) 23,391 (51,330) (219.4) Income tax (expense) benefit (2,689) (4,043) 1,354 33.5 Net income (loss) (30,628) 19,348 (49,976) (258.3) (Income) loss attributable to noncontrolling interest in consolidated entities (1,619) (2,063) 444 21.5 Net (income) loss attributable to redeemable noncontrolling interests in operating partnership 5,230 476 4,754 998.7 Net income (loss) attributable to the Company $ (27,017) $ 17,761 $ (44,778) (252.1) % All hotel properties owned for the years ended December 31, 2023 and 2022 have been included in our results of operations during the respective periods in which they were owned.
Our capital improvements consisted of approximately $28.0 million of return on investment capital projects and approximately $21.2 million of renewal and replacement capital projects. Return on investment capital projects are designed to improve the positioning of our hotel properties within their markets and competitive sets.
Return on investment capital projects are designed to improve the positioning of our hotel properties within their markets and competitive sets. Renewal and replacement capital projects are designed to maintain the quality and competitiveness of our hotels. Net Cash Flows Provided by (Used in) Financing Activities.
Management determined that it is more likely than not that $18.6 million of our net deferred tax assets will not be realized and a valuation allowance has been recorded accordingly. 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.
Management determined that it is more likely than not that $16.2 million of our net deferred tax assets will not be realized and a valuation allowance has been recorded accordingly.
Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 7.69% and 8.83% as of December 31, 2022 and 2021, respectively.
Noncontrolling interests in operating partnership were allocated a net loss of $5.2 million in 2023 and net loss of $476,000 in 2022. Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 6.63% and 7.69% as of December 31, 2023 and 2022, respectively.
There was no material impact as a result of this adoption. Non-GAAP Financial Measures The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO are presented to help our investors evaluate our operating performance.
We are currently evaluating the impact that ASU 2023-09 will have on our consolidated financial statements and related disclosures. Non-GAAP Financial Measures The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO are presented to help our investors evaluate our operating performance.
C Beverly Hills Hotel, The Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale, respectively. 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 $22.2 million, or 39.1%, to $78.8 million during 2022 compared to 2021.
Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals, increased $10.3 million, or 13.0%, to $89.1 million during 2023 compared to 2022.
Thomas and The Ritz-Carlton Lake Tahoe. These increases were partially offset by an aggregate decrease of $5.2 million at nine comparable hotel properties primarily due to fully depreciated assets. Advisory Services Fee.
These increases were partially offset by an aggregate decrease of $3.7 million at the Sofitel Chicago Magnificent Mile, The Clancy, Pier House Resort & Spa, Hotel Yountville, Bardessono Hotel and Spa and Cameo Beverly Hills, primarily due to fully depreciated assets. Advisory Services Fee.
C Beverly Hills Hotel Los Angeles, California Acquisition August 5, 2021 The Ritz-Carlton Reserve Dorado Beach Dorado, Puerto Rico Acquisition March 11, 2022 Four Seasons Resort Scottsdale Scottsdale, Arizona Acquisition December 1, 2022 The following table illustrates the key performance indicators of all hotel properties for the periods indicated: Year Ended December 31, 2022 2021 Occupancy 65.62 % 52.47 % ADR (average daily rate) $ 451.56 $ 386.45 RevPAR (revenue per available room) $ 296.30 $ 202.76 Rooms revenue (in thousands) $ 431,515 $ 280,568 Total hotel revenue (in thousands) $ 669,585 $ 427,542 The following table illustrates the key performance indicators of the 13 hotel properties that were included for the full year ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Occupancy 65.50 % 52.29 % ADR (average daily rate) $ 421.09 $ 387.47 RevPAR (revenue per available room) $ 275.83 $ 202.61 Rooms revenue (in thousands) $ 376,861 $ 276,038 Total hotel revenue (in thousands) $ 583,659 $ 420,949 Net Income (Loss) Attributable to the Company.
The following acquisitions affect reporting comparability related to our consolidated financial statements: Hotel Property Location Type Date The Ritz-Carlton Reserve Dorado Beach Dorado, Puerto Rico Acquisition March 11, 2022 Four Seasons Resort Scottsdale Scottsdale, Arizona Acquisition December 1, 2022 90 The following table illustrates the key performance indicators of all hotel properties owned for the periods indicated: Year Ended December 31, 2023 2022 Occupancy 66.94 % 65.62 % ADR (average daily rate) $ 451.48 $ 451.56 RevPAR (revenue per available room) $ 302.20 $ 296.30 Rooms revenue (in thousands) $ 464,899 $ 431,515 Total hotel revenue (in thousands) $ 739,343 $ 669,585 The following table illustrates the key performance indicators of the 14 hotel properties that were owned for the full years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Occupancy 68.16 % 65.83 % ADR (average daily rate) $ 390.42 $ 418.04 RevPAR (revenue per available room) $ 266.10 $ 275.18 Rooms revenue (in thousands) $ 378,674 $ 390,332 Total hotel revenue (in thousands) $ 591,432 $ 603,143 Net Income (Loss) Attributable to the Company.
The increase is attributable to an aggregate increase in rooms expense of $22.9 million at 13 comparable hotel properties due to the hotel properties recovering from the COVID-19 pandemic and increases of $2.7 million at the Mr. C Beverly Hills Hotel, $8.5 million at The Ritz-Carlton Reserve Dorado Beach as well as $538,000 at the Four Seasons Resort Scottsdale.
This increase is attributable to an aggregate increase in rooms expense of $4.3 million at six comparable hotel properties, an increase of $1.7 million at The Ritz-Carlton Reserve Dorado Beach and an increase of $7.3 million at the Four Seasons Resort Scottsdale. These increases were partially offset by an aggregate decrease of approximately $2.3 million at The Ritz-Carlton St.
The mortgage loan is interest only and bears interest at a rate of SOFR + 3.75% with a SOFR floor of 1.00%. On January 18, 2023, the Company repaid its $54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach.
Debt Transactions On January 18, 2023, the Company repaid its $54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach, which resulted in a gain on extinguishment of debt of $2.3 million for the year ended December 31, 2023.
Realized and 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. Income Tax (Expense) Benefit . Income tax expense increased $2.7 million, from $1.3 million in 2021 to $4.0 million in 2022.
Realized and Unrealized Gain (Loss) on Derivatives . Realized and unrealized loss on derivatives of $663,000 for 2023 consisted of unrealized loss on interest rate caps of approximately $8.7 million, partially offset by an unrealized gain on warrants of $272,000 and a realized gain of $7.8 million associated with payments received from counterparties on in-the-money interest rate caps.
Thomas Hotel Total Corporate / Allocated (1) Braemar Hotels & Resorts Inc.
Thomas Cameo Beverly Hills The Ritz-Carlton Dorado Beach Four Seasons Resort Scottsdale Hotel Total Corporate / Allocated (1) Braemar Hotels & Resorts Inc.
C Beverly Hills Hotel, $2.1 million at The Ritz-Carlton Reserve Dorado Beach and $78,000 at the Four Seasons Resort Scottsdale as a result of their acquisitions, as well as an aggregate increase of approximately $1.3 million at eight hotel properties. Depreciation and Amortization . Depreciation and amortization increased $4.4 million, or 5.9%, to $78.1 million for 2022 compared to 2021.
Property taxes, insurance and other increased $7.9 million, or 25.6%, to $38.6 million in 2023 compared to 2022. This increase is primarily attributable to an aggregate increase of $5.9 million at 12 comparable hotel properties, $1.2 million at The Ritz-Carlton Reserve Dorado Beach and $875,000 at the Four Seasons Resort Scottsdale.
Direct expenses were 4.3% of total hotel revenue in 2022 and 4.9% in 2021. The increase in direct expenses is associated with higher direct expenses of approximately $2.9 million at 11 comparable hotel properties as they are recovering from the COVID-19 pandemic, as well as an increase of $61,000 at the Mr.
Direct expenses were 4.3% of total hotel revenue in 2023 and 4.3% in 2022. The increase in direct expenses is associated with higher direct expenses of approximately $1.1 million at nine comparable hotel properties, $1.3 million at The Ritz-Carlton Reserve Dorado Beach and $2.6 million at the Four Seasons Resort Scottsdale.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed2 unchanged
Biggest changeWe 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, 2022, our total indebtedness of approximately $1.3 billion included approximately $1.3 billion of variable-rate debt.
Biggest changeWe 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, 2023, our total indebtedness of approximately $1.2 billion included approximately $1.1 billion of variable-rate debt.
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
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. 107
The information presented above includes those exposures that existed at December 31, 2022, but it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value.
The information presented above includes those exposures that existed at December 31, 2023, but it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value.
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, 2022, would be approximately $3.1 million per year. However, we currently have various interest rate caps in place that limit this exposure.
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, 2023, would be approximately $2.7 million per year. However, we currently have various interest rate caps in place that limit this exposure.

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