BRAEMAR HOTELS & RESORTS November 2020 Forward Looking Statements and Non-GAAP Measures In keeping with the SEC's "Safe Harbor" guidelines, certain statements made during this presentation could be considered forward-looking and subject to certain risks and uncertainties that could cause results to differ materially from those projected. When we use the words "will likely result," "may," "anticipate," "estimate," "should," "expect," "believe," "intend," or similar expressions, we intend to identify forward- ...

FORM 10-Q Filing Information [Registrant Information](index=1&type=section&id=Registrant%20Information) This report is Braemar Hotels & Resorts Inc.'s Form 10-Q for Q3 2020, confirming compliance with filing requirements as an Accelerated Filer - Company Name: **BRAEMAR HOTELS & RESORTS INC.**[1](index=1&type=chunk) - Reporting Period: Quarter ended **September 30, 2020**[1](index=1&type=chunk) - Filing Status: **Accelerated Filer**[3](index=3&type=chunk) Registered Securities Information | Security Type | Ticker | Exchange | | :--------------------------------- | :------- | :----------------------------------- | | Common Stock | BHR | New York Stock Exchange | | Preferred Stock, Series B | BHR-PB | New York Stock Exchange | | Preferred Stock, Series D | BHR-PD | New York Stock Exchange | | Common Stock (par value $0.01 per share) | | 36,686,729 shares (as of November 5, 2020) | TABLE OF CONTENTS [TABLE OF CONTENTS](index=2&type=section&id=TABLE%20OF%20CONTENTS) This section provides an organized list of all chapters and sub-sections within the report for easy navigation PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS (unaudited)](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(unaudited)) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, equity, and cash flows [CONDENSED CONSOLIDATED BALANCE SHEETS](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of September 30, 2020, total assets decreased to **$1.702 billion**, while total liabilities increased to **$1.282 billion**, and total equity declined to **$282.582 million** Condensed Consolidated Balance Sheets Key Data (Units: thousands of dollars) | Indicator | September 30, 2020 | December 31, 2019 | | :--------------------------------- | :----------------- | :---------------- | | **Assets** | | | | Investments in hotel properties, net | 1,436,679 | 1,481,422 | | Cash and cash equivalents | 88,227 | 71,995 | | Restricted cash | 34,658 | 58,388 | | Total assets | 1,702,144 | 1,758,947 | | **Liabilities** | | | | Indebtedness, net | 1,132,987 | 1,058,486 | | Accounts payable and accrued expenses | 64,931 | 94,919 | | Total liabilities | 1,282,497 | 1,247,203 | | **Equity** | | | | Equity attributable to company's stockholders | 296,209 | 369,267 | | Total equity | 282,582 | 363,254 | [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For the three months ended September 30, 2020, total revenue significantly decreased by **62.4%** to **$44,754 thousand**, leading to an expanded net loss of **$23,057 thousand** and a basic and diluted loss per share of **$0.63** Condensed Consolidated Statements of Operations Key Data (Units: thousands of dollars, except per share amounts) | Indicator | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Total revenue | 44,754 | 118,884 | | Total hotel operating expenses | 37,806 | 79,147 | | Operating income (loss) | (14,319) | 7,320 | | Income (loss) before income taxes | (24,602) | (8,799) | | Net income (loss) | (23,057) | (8,954) | | Net income (loss) attributable to the company | (18,677) | (9,388) | | Net income (loss) attributable to common stockholders | (21,231) | (11,921) | | Basic and diluted net income (loss) per share | (0.63) | (0.37) | | Indicator | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Total revenue | 175,169 | 365,913 | | Total hotel operating expenses | 146,093 | 238,378 | | Operating income (loss) | (57,401) | 34,118 | | Income (loss) before income taxes | (99,171) | (14,406) | | Net income (loss) | (94,549) | (15,899) | | Net income (loss) attributable to the company | (79,538) | (14,879) | | Net income (loss) attributable to common stockholders | (87,202) | (22,476) | | Basic and diluted net income (loss) per share | (2.63) | (0.71) | [CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)) For the three months ended September 30, 2020, the company reported a total comprehensive loss of **$23,057 thousand**, with **$18,677 thousand** attributable to the company, indicating a widened loss compared to the prior year Condensed Consolidated Statements of Comprehensive Income (Loss) Key Data (Units: thousands of dollars) | Indicator | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Net income (loss) | (23,057) | (8,954) | | Other comprehensive income (loss), net of tax | — | — | | Total comprehensive income (loss) | (23,057) | (8,954) | | Comprehensive income (loss) attributable to the company | (18,677) | (9,388) | | Indicator | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Net income (loss) | (94,549) | (15,899) | | Other comprehensive income (loss), net of tax | — | — | | Total comprehensive income (loss) | (94,549) | (15,899) | | Comprehensive income (loss) attributable to the company | (79,538) | (14,879) | [CONDENSED CONSOLIDATED STATEMENTS OF EQUITY](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) As of September 30, 2020, total equity decreased to **$282,582 thousand** from **$363,254 thousand** at December 31, 2019, primarily due to common stock issuance, equity compensation, preferred stock dividends, and net loss Condensed Consolidated Statements of Equity Key Data (Units: thousands of dollars, except per share amounts) | Indicator | September 30, 2020 | December 31, 2019 | | :--------------------------------- | :----------------- | :---------------- | | 8.25% Series D Preferred Stock shares | 1,600 | 1,600 | | 8.25% Series D Preferred Stock amount | 16 | 16 | | Common Stock shares | 36,600 | 32,885 | | Common Stock amount | 365 | 329 | | Additional paid-in capital | 533,641 | 519,551 | | Accumulated deficit | (237,813) | (150,629) | | Total equity attributable to company's stockholders | 296,209 | 369,267 | | Noncontrolling interests in consolidated entities | (13,627) | (6,013) | | Total equity | 282,582 | 363,254 | | 5.50% Series B Convertible Preferred Stock shares | 5,031 | 5,008 | | 5.50% Series B Convertible Preferred Stock amount | 107,352 | 106,920 | | Redeemable noncontrolling interests in operating partnership | 29,713 | 41,570 | - As of September 30, 2020, **3,046 thousand** common shares were issued, increasing additional paid-in capital by **$6,380 thousand**[12](index=12&type=chunk) - For the three months ended September 30, 2020, preferred stock dividends of **$2,554 thousand** were paid[12](index=12&type=chunk) - Net loss for the three months ended September 30, 2020, increased the accumulated deficit by **$18,677 thousand**[12](index=12&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the nine months ended September 30, 2020, operating activities resulted in a **$35,629 thousand** outflow, investing activities a **$18,949 thousand** outflow, while financing activities generated a **$47,085 thousand** inflow, with total cash, cash equivalents, and restricted cash at period-end reaching **$122,885 thousand** Condensed Consolidated Statements of Cash Flows Key Data (Units: thousands of dollars) | Indicator | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Net cash flow from operating activities | (35,629) | 48,966 | | Net cash flow from investing activities | (18,949) | (209,965) | | Net cash flow from financing activities | 47,085 | 42,461 | | Net change in cash, cash equivalents, and restricted cash | (7,493) | (118,538) | | Cash, cash equivalents, and restricted cash at end of period | 122,885 | 139,950 | - Operating cash outflow was primarily driven by a net loss of **$94,549 thousand**, partially offset by depreciation and amortization of **$55,398 thousand**[16](index=16&type=chunk) - Investing cash outflow was mainly for capital improvements to hotel properties totaling **$21,451 thousand**, partially offset by insurance proceeds of **$2,528 thousand**[16](index=16&type=chunk) - Financing cash inflow primarily resulted from borrowings of **$109,317 thousand**, partially offset by debt repayments of **$46,033 thousand** and dividend and distribution payments of **$13,599 thousand**[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering organization, accounting policies, revenue, investments, debt, derivatives, fair value measurements, earnings per share, equity, and related party transactions [1. Organization and Description of Business](index=12&type=section&id=1.%20Organization%20and%20Description%20of%20Business) Braemar Hotels & Resorts Inc. invests in high-RevPAR luxury hotels and resorts, operates as a REIT through Braemar OP, and is advised by Ashford Hospitality Advisors LLC, owning 13 hotel properties as of September 30, 2020 - Company investment strategy: high RevPAR luxury hotels and resorts, with RevPAR at least **twice the national U.S. average**[21](index=21&type=chunk) - REIT status: has elected to be taxed as a **Real Estate Investment Trust (REIT)**[21](index=21&type=chunk) - Operating model: owns assets through operating partnership Braemar OP, advised by Ashford LLC for advisory and asset management services, and engages hotel management companies for operations[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) - Hotel portfolio: as of September 30, 2020, owns **13 hotel properties** with **3,722 guestrooms** across 6 states, the District of Columbia, and the U.S. Virgin Islands[25](index=25&type=chunk) - COVID-19 impact: significant decline in occupancy and RevPAR since late February 2020, with 11 hotels temporarily suspending operations, expected to materially negatively impact operations, financial condition, and cash flows for the remainder of 2020 and 2021[27](index=27&type=chunk)[29](index=29&type=chunk) - Liquidity measures: fully drew down **$75 million** secured revolving credit facility (later converted to a term loan), suspended common stock cash dividends, and significantly reduced capital expenditures and hotel operating expenses[29](index=29&type=chunk) - Debt defaults and waivers: almost all loan agreements were in default for interest payments starting April 1, 2020, but through forbearance and other agreements with lenders, all loans were no longer in default as of September 30, 2020[30](index=30&type=chunk) - Going concern assessment: management believes significant doubt about the company's ability to continue as a going concern has been alleviated based on completed credit agreement amendments, forbearance agreements, existing cash, and operating projections for the next 12 months[36](index=36&type=chunk) [2. Significant Accounting Policies](index=14&type=section&id=2.%20Significant%20Accounting%20Policies) These condensed consolidated financial statements are prepared under GAAP and Form 10-Q requirements, consolidating Braemar Hotels & Resorts Inc. and its majority-owned subsidiaries, including Braemar OP as a Variable Interest Entity - Preparation basis: prepared in accordance with GAAP and Form 10-Q interim financial information requirements, including normal recurring accruals[37](index=37&type=chunk) - Consolidation principles: include Braemar Hotels & Resorts Inc. and its majority-owned subsidiaries and controlled entities, with all significant intercompany accounts and transactions eliminated[37](index=37&type=chunk) - Variable Interest Entity: Braemar OP is considered a Variable Interest Entity (VIE), with the company as its primary beneficiary, thus consolidated[38](index=38&type=chunk) - Comparability impact: historical seasonality patterns and the acquisition of Ritz-Carlton, Lake Tahoe on January 15, 2019, affect financial statement comparability[39](index=39&type=chunk) - New accounting standards: ASU 2016-13 (Financial Instruments—Credit Losses) adopted January 1, 2020, had no material impact; ASU 2020-01 (Investments—Equity Securities), ASU 2020-04 (Reference Rate Reform), and ASU 2020-06 (Convertible Instruments) are being evaluated for potential impact[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [3. Revenue](index=16&type=section&id=3.%20Revenue) For the three months ended September 30, 2020, total hotel revenue significantly decreased to **$44,754 thousand** year-over-year, with California contributing the highest room revenue and USVI hotels also showing significant revenue Hotel Revenue by Geographic Region (Units: thousands of dollars) | Geographic Region | Number of Hotels | Total Hotel Revenue for Three Months Ended September 30, 2020 | | :---------------- | :--------------- | :---------------------------------------------------- | | California | 5 | 15,935 | | Colorado | 1 | 4,039 | | Florida | 2 | 13,540 | | Illinois | 1 | 2,073 | | Pennsylvania | 1 | 1,155 | | Washington | 1 | 1,177 | | Washington D.C. | 1 | 627 | | USVI | 1 | 6,208 | | **Total** | **13** | **44,754** | | Geographic Region | Number of Hotels | Total Hotel Revenue for Three Months Ended September 30, 2019 | | :---------------- | :--------------- | :---------------------------------------------------- | | California | 5 | 45,701 | | Colorado | 1 | 9,069 | | Florida | 2 | 15,666 | | Illinois | 1 | 10,217 | | Pennsylvania | 1 | 8,459 | | Washington | 1 | 12,392 | | Washington D.C. | 1 | 12,955 | | USVI | 1 | 4,423 | | **Total** | **13** | **118,884** | | Geographic Region | Number of Hotels | Total Hotel Revenue for Nine Months Ended September 30, 2020 | | :---------------- | :--------------- | :--------------------------------------------------- | | California | 5 | 54,811 | | Colorado | 1 | 19,827 | | Florida | 2 | 47,228 | | Illinois | 1 | 6,257 | | Pennsylvania | 1 | 7,680 | | Washington | 1 | 6,155 | | Washington D.C. | 1 | 11,513 | | USVI | 1 | 21,698 | | **Total** | **13** | **175,169** | | Geographic Region | Number of Hotels | Total Hotel Revenue for Nine Months Ended September 30, 2019 | | :---------------- | :--------------- | :--------------------------------------------------- | | California | 5 | 127,737 | | Colorado | 1 | 31,688 | | Florida | 2 | 65,796 | | Illinois | 1 | 26,017 | | Pennsylvania | 1 | 22,149 | | Washington | 1 | 29,637 | | Washington D.C. | 1 | 43,835 | | USVI | 1 | 19,047 | | **Total** | **13** | **365,913** | - In Q3 2020, the company reported **$0** in business interruption losses due to Hurricane Irma, compared to **$4 million** in the prior-year period[52](index=52&type=chunk) - For the nine months ended September 30, 2020, business interruption losses from Hurricane Irma were **$4 million**, compared to **$16.6 million** in the prior-year period[52](index=52&type=chunk) [4. Investments in Hotel Properties, net](index=17&type=section&id=4.%20Investments%20in%20Hotel%20Properties,%20net) As of September 30, 2020, net investments in hotel properties decreased to **$1,436,679 thousand** from **$1,481,422 thousand** at December 31, 2019, primarily due to increased accumulated depreciation and reduced construction in progress, with a **$10.1 million** gain recognized from a Hurricane Irma insurance settlement Investments in Hotel Properties, net (Units: thousands of dollars) | Indicator | September 30, 2020 | December 31, 2019 | | :--------------------------------- | :----------------- | :---------------- | | Land | 455,298 | 455,298 | | Buildings and improvements | 1,187,947 | 1,173,151 | | Furniture, fixtures, and equipment | 127,553 | 129,595 | | Construction in progress | 9,758 | 33,130 | | Total cost | 1,780,556 | 1,791,174 | | Accumulated depreciation | (343,877) | (309,752) | | Investments in hotel properties, net | 1,436,679 | 1,481,422 | - In September 2020, the company reached a final settlement for Hurricane Irma insurance claims, recognizing a **$10.1 million** gain as proceeds exceeded the hotel property's book value at the time of loss[55](index=55&type=chunk) - As of September 30, 2020, the company had **$6.5 million** in accounts receivable related to insurance settlements[55](index=55&type=chunk) - For the nine months ended September 30, 2020, the company received **$8 million** from insurers for Hurricane Irma property damage and business interruption, compared to **$14.9 million** in the prior-year period[56](index=56&type=chunk) - No impairment charges were recorded for the three and nine months ended September 30, 2020, or 2019[57](index=57&type=chunk) [5. Investment in Unconsolidated Entity](index=17&type=section&id=5.%20Investment%20in%20Unconsolidated%20Entity) The company's investment in OpenKey, a hotel mobile key platform, is accounted for using the equity method, with a total investment of **$2.4 million** and a carrying value of **$1,787 thousand** as of September 30, 2020, reflecting an **8.2%** ownership stake and equity losses for the period - Investment target: **OpenKey**, a hotel mobile key platform[58](index=58&type=chunk) - Accounting method: accounted for using the **equity method** due to the company's significant influence[59](index=59&type=chunk) OpenKey Investment Summary (Units: thousands of dollars) | Indicator | September 30, 2020 | December 31, 2019 | | :--------------------------------- | :----------------- | :---------------- | | Investment carrying value | 1,787 | 1,899 | | Ownership percentage | 8.2% | 8.6% | | Equity income (loss) | | | | Three Months Ended September 30, 2020 | (58) | (48) | | Nine Months Ended September 30, 2020 | (138) | (149) | - Additional investment of **$26 thousand** was made during the nine months ended September 30, 2020[58](index=58&type=chunk) [6. Indebtedness, net](index=19&type=section&id=6.%20Indebtedness,%20net) As of September 30, 2020, net indebtedness increased to **$1,132,987 thousand** from **$1,058,486 thousand** at December 31, 2019, primarily comprising multiple mortgage loans and a **$65 million** secured term loan, with prior defaults resolved through forbearance agreements and **$9.9 million** in capitalized default interest and late fees Indebtedness, net Composition (Units: thousands of dollars) | Debt Type | Collateral | Maturity Date | Interest Rate (LIBOR+) | September 30, 2020 | December 31, 2019 | | :--------------------------------- | :--------------------------------------- | :------------ | :------------- | :----------------- | :---------------- | | Secured Revolving Credit Facility | Equity | October 2022 | 1.25%-3.50% | — | — | | Mortgage Loan | Park Hyatt Beaver Creek | April 2021 | 2.75% | 67,500 | 67,500 | | Mortgage Loan | The Notary Hotel, etc. | June 2021 | 2.16% | 435,000 | 435,000 | | Mortgage Loan | Ritz-Carlton, St. Thomas | August 2021 | 3.95% | 42,500 | 42,500 | | Mortgage Loan | Hotel Yountville | May 2022 | 2.55% | 51,000 | 51,000 | | Mortgage Loan | Bardessono Hotel | August 2022 | 2.55% | 40,000 | 40,000 | | Term Loan | Equity | October 2022 | 1.25%-3.50% | 63,284 | — | | Mortgage Loan | Ritz-Carlton, Sarasota | April 2023 | 2.65% | 100,000 | 100,000 | | Mortgage Loan | Ritz-Carlton, Lake Tahoe | January 2024 | 2.10% | 54,000 | 54,000 | | Mortgage Loan | Capital Hilton, etc. | February 2024 | 1.70% | 197,229 | 195,000 | | Mortgage Loan | Pier House Resort | September 2024 | 1.85% | 80,000 | 80,000 | | **Total Indebtedness** | | | | **1,130,513** | **1,065,000** | | Capitalized default interest and late fees | | | | 8,610 | — | | Deferred loan costs, net | | | | (6,136) | (6,514) | | **Indebtedness, net** | | | | **1,132,987** | **1,058,486** | - On June 8, 2020, the company converted its **$75 million** secured revolving credit facility into a **$65 million** secured term loan, repaying **$10 million** in principal[63](index=63&type=chunk) - Starting April 1, 2020, almost all loan agreements were in default for interest payments, but through forbearance and other agreements with lenders, all loans were no longer in default as of September 30, 2020[64](index=64&type=chunk)[65](index=65&type=chunk) - **$9.9 million** in default interest and late fees were capitalized into loan balances and will be amortized over the remaining loan terms using the effective interest method[67](index=67&type=chunk) - For the nine months ended September 30, 2020, the company repaid **$34.3 million** in PPP loans[62](index=62&type=chunk) [7. Derivative Instruments](index=22&type=section&id=7.%20Derivative%20Instruments) The company primarily uses interest rate derivatives, including interest rate caps and floors, to hedge debt and cash flow risks, and credit default swaps linked to the CMBX index to hedge financial and capital market risks, with notional amounts of **$779,000 thousand** for interest rate caps and **$50,000 thousand** for credit default swaps as of September 30, 2020 - Interest rate derivatives: primarily used to hedge debt and cash flow risks, including interest rate caps and floors[68](index=68&type=chunk) Interest Rate Derivative Summary (Units: thousands of dollars) | Indicator | September 30, 2020 | December 31, 2019 | | :--------------------------------- | :----------------- | :---------------- | | Interest rate cap notional amount | 779,000 | 968,000 | | Interest rate cap strike rate range | 3.00%-4.00% | 3.00%-7.80% | | Interest rate floor notional amount | — | 5,000,000 | - Credit default swaps: used to hedge financial and capital market risks, linked to the CMBX index; as of September 30, 2020, the notional amount was **$50,000 thousand**, with an estimated total exposure of approximately **$1.2 million**[71](index=71&type=chunk) [8. Fair Value Measurements](index=24&type=section&id=8.%20Fair%20Value%20Measurements) The company measures financial instruments using a three-level fair value hierarchy, with credit default swaps valued by third parties as Level 2 inputs, but classified as Level 3 if valuation adjustments using unobservable inputs like credit spreads are significant to the overall valuation, resulting in **$777 thousand** in derivative assets as of September 30, 2020 - Fair value hierarchy: categorized into three levels based on the observability of market inputs[72](index=72&type=chunk) - Credit default swaps: fair value obtained from third parties, classified as Level 2 inputs[73](index=73&type=chunk) - Derivative valuation: when valuation adjustments use Level 3 inputs (e.g., credit spreads) and are significant to the overall valuation, derivative valuations are classified as Level 3 overall[74](index=74&type=chunk) Assets and Liabilities Measured at Fair Value by Level (Units: thousands of dollars) | Indicator | Total as of September 30, 2020 | Total as of December 31, 2019 | | :--------------------------------- | :----------------------------- | :---------------------------- | | **Assets** | | | | Derivative assets: | | | | Credit default swaps | 777 | 528 | | Interest rate derivatives - floors | — | 53 | | Interest rate derivatives - caps | — | 1 | | **Total Derivative Assets** | **777** | **582** | Impact of Fair Value Measured Assets and Liabilities on Consolidated Statements of Operations (Units: thousands of dollars) | Indicator | Gain (Loss) for Three Months Ended September 30, 2020 | Gain (Loss) for Three Months Ended September 30, 2019 | | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Interest rate derivatives - floors | — | (717) | | Interest rate derivatives - caps | (30) | (26) | | Credit default swaps | 51 | (61) | | **Total Derivative Assets** | **21** | **(804)** | | Unrealized gain (loss) on Ashford Inc. investment | — | (1,471) | | **Total** | **21** | **(2,275)** | [9. Summary of Fair Value of Financial Instruments](index=26&type=section&id=9.%20Summary%20of%20Fair%20Value%20of%20Financial%20Instruments) As of September 30, 2020, the company's derivative assets had a carrying and fair value of **$777 thousand**, while short-term financial instruments like cash and accounts receivable approximated fair value, and debt's fair value was estimated between **78.3%** and **86.5%** of its carrying value, reflecting market interest rates and credit spreads Carrying Value and Estimated Fair Value of Financial Instruments (Units: thousands of dollars) | Financial Instrument Type | Carrying Value as of September 30, 2020 | Estimated Fair Value as of September 30, 2020 | Carrying Value as of December 31, 2019 | Estimated Fair Value as of December 31, 2019 | | :--------------------------------- | :------------------------------------ | :------------------------------------------ | :----------------------------------- | :----------------------------------------- | | Derivative assets | 777 | 777 | 582 | 582 | | Cash and cash equivalents | 88,227 | 88,227 | 71,995 | 71,995 | | Restricted cash | 34,658 | 34,658 | 58,388 | 58,388 | | Accounts receivable, net | 17,335 | 17,335 | 19,053 | 19,053 | | Indebtedness | 1,130,513 | 884,893 to 978,040 | 1,065,000 | 1,003,863 to 1,109,532 | | Accounts payable and accrued expenses | 64,931 | 64,931 | 94,919 | 94,919 | - The carrying value of cash, cash equivalents, and restricted cash approximates fair value due to their short maturities and market interest rates, classified as Level 1 valuation techniques[81](index=81&type=chunk) - Short-term financial instruments like accounts receivable and accounts payable approximate fair value, classified as Level 1 valuation techniques[82](index=82&type=chunk) - The fair value of indebtedness is determined by discounting future cash flows at current replacement rates, classified as Level 2 valuation techniques; as of September 30, 2020, debt fair value was estimated between **78.3%** and **86.5%** of its carrying value[84](index=84&type=chunk) [10. Income (Loss) Per Share](index=28&type=section&id=10.%20Income%20(Loss)%20Per%20Share) For the three months ended September 30, 2020, net loss attributable to common stockholders was **$21,231 thousand**, resulting in a basic and diluted loss per share of **$0.63**, with certain items excluded from diluted EPS calculation due to their anti-dilutive effect Income (Loss) Per Share Calculation Summary (Units: thousands of dollars, except per share amounts) | Indicator | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Net income (loss) attributable to the company | (18,677) | (9,388) | | Less: Preferred stock dividends | (2,554) | (2,533) | | Net income (loss) attributable to common stockholders | (21,231) | (11,921) | | Weighted-average common shares outstanding – basic and diluted | 33,923 | 32,347 | | Basic and diluted net income (loss) per share | (0.63) | (0.37) | | Indicator | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Net income (loss) attributable to the company | (79,538) | (14,879) | | Less: Preferred stock dividends | (7,664) | (7,597) | | Net income (loss) attributable to common stockholders | (87,202) | (22,476) | | Weighted-average common shares outstanding – basic and diluted | 33,103 | 32,259 | | Basic and diluted net income (loss) per share | (2.63) | (0.71) | - Due to their anti-dilutive effect, unvested restricted stock, unvested performance share units, redeemable noncontrolling interests in the operating partnership, Series B preferred stock dividends, advisory services incentive fee shares, and contingently issuable shares were not reflected in the diluted earnings (loss) per share calculation[87](index=87&type=chunk) [11. Redeemable Noncontrolling Interests in Operating Partnership](index=28&type=section&id=11.%20Redeemable%20Noncontrolling%20Interests%20in%20Operating%20Partnership) Redeemable noncontrolling interests represent limited partners' proportional equity and income/loss allocations in Braemar OP, with common and LTIP units convertible into common stock or cash, totaling **$29,713 thousand** and representing **10.08%** ownership as of September 30, 2020 - Redeemable noncontrolling interests: represent the proportional equity share and income/loss allocations of limited partners in Braemar OP[88](index=88&type=chunk) - LTIP units: typically have a three-year vesting period and are convertible into common units upon achieving economic parity, which can then be redeemed for cash or converted into company common stock[90](index=90&type=chunk) - Director compensation adjustment: for fiscal year 2020, independent directors will receive full annual cash retainers, with **25%** paid in fully vested common stock or LTIP units and **75%** in cash (with an option to convert to stock or LTIP units)[91](index=91&type=chunk) - Performance LTIP units: granted to executives and directors, with the actual number earned ranging from **0% to 200%** of the target based on relative total shareholder return performance[93](index=93&type=chunk) Redeemable Noncontrolling Interests in Operating Partnership Summary (Units: thousands of dollars) | Indicator | September 30, 2020 | December 31, 2019 | | :--------------------------------- | :----------------- | :---------------- | | Redeemable noncontrolling interests | 29,713 | 41,570 | | Operating partnership ownership percentage | 10.08% | 10.96% | | Net income (loss) attributable to redeemable noncontrolling interests | | | | Three Months Ended September 30, 2020 | 2,381 | 1,465 | | Nine Months Ended September 30, 2020 | 10,036 | 2,770 | [12. Equity and Stock-Based Compensation](index=31&type=section&id=12.%20Equity%20and%20Stock-Based%20Compensation) The company suspended common stock dividends in 2020 but continued Series D cumulative preferred stock dividends, granted Performance Share Units (PSUs) and Restricted Stock Units (RSUs) as equity incentives, and issued **3 million** common shares for **$7.7 million** through an "at-the-market" equity distribution program as of September 30, 2020 - Common stock dividends: no common stock dividends paid for the nine months ended September 30, 2020, compared to **$16,004 thousand** paid in the prior-year period[99](index=99&type=chunk) - Performance Share Units (PSUs): **225,000 PSUs** granted in March 2020 with a fair value of approximately **$790 thousand** and a three-year vesting period[99](index=99&type=chunk) - Restricted Stock Units (RSUs): **311,000 RSUs** granted in March 2020 with a fair value of approximately **$1.4 million** and a three-year vesting period; independent directors also received immediately vested common stock[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - Series D cumulative preferred stock dividends: **$2,475 thousand** paid for the nine months ended September 30, 2020, consistent with the prior-year period[103](index=103&type=chunk) - Stock repurchase program: board approved a **$50 million** stock repurchase program, with **$50 million** remaining authorized and unused as of September 30, 2020[103](index=103&type=chunk)[104](index=104&type=chunk) "At-the-Market" Common Stock Equity Distribution Program Issuance Activity (Units: thousands of dollars) | Indicator | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | | :--------------------------------- | :------------------------------------ | :----------------------------------- | | Common shares issued | 3,046 | 3,046 | | Gross proceeds received | 7,715 | 7,715 | | Commissions and other fees | 97 | 97 | | Net proceeds | 7,618 | 7,618 | [13. 5.50% Series B Cumulative Convertible Preferred Stock](index=32&type=section&id=13.%205.50%25%20Series%20B%20Cumulative%20Convertible%20Preferred%20Stock) Series B cumulative convertible preferred stock is convertible into common stock at the holder's option at **$18.70 per share**, or at the company's option under specific conditions, and includes cash redemption features; for the nine months ended September 30, 2020, the company issued **23 thousand** Series B preferred shares for **$432 thousand** net proceeds and paid **$5,189 thousand** in dividends - Conversion feature: holders may elect to convert into common stock at a conversion price of **$18.70 per share** (conversion rate of **1.3372** common shares)[107](index=107&type=chunk) - Company optional conversion: under certain conditions, the company may elect to convert all or part of the Series B preferred stock into common stock[108](index=108&type=chunk) - Cash redemption features: include optional redemption (at **$25.00 per share**), special optional redemption (at **$25.00 per share**), and REIT termination event and listing event redemption (at **103%** of liquidation preference)[109](index=109&type=chunk)[110](index=110&type=chunk) Series B Cumulative Convertible Preferred Stock Issuance Activity (Units: thousands of dollars) | Indicator | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | | :--------------------------------- | :------------------------------------ | :----------------------------------- | | Shares issued | — | 23 | | Gross proceeds received | — | 439 | | Commissions and other fees | — | 7 | | Net proceeds | — | 432 | - Dividend payments: **$5,189 thousand** in dividends paid for the nine months ended September 30, 2020, compared to **$5,122 thousand** in the prior-year period[114](index=114&type=chunk) [14. Related Party Transactions](index=33&type=section&id=14.%20Related%20Party%20Transactions) The company engages in various related party transactions with Ashford Inc. and its subsidiaries, including advisory agreements, Lismore advisory fees, Ashford Securities investment, Enhanced Return Funding Program (ERFP), and project and hotel management agreements, involving advisory fees, equity compensation, debt restructuring service fees, operating expense allocations, and hotel management fees - Advisory agreement: the company pays Ashford LLC monthly base advisory fees (based on total market capitalization and net asset fee adjustments), reimburses certain expenses, and includes equity incentive compensation and incentive fees[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) Advisory Services Fees Summary (Units: thousands of dollars) | Indicator | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Base advisory fee | 2,386 | 2,650 | | Reimbursable expenses | 404 | 645 | | Equity incentive compensation | 1,785 | 1,995 | | Incentive fee | — | (132) | | **Total** | **4,575** | **5,158** | | Indicator | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Base advisory fee | 7,579 | 8,170 | | Reimbursable expenses | 1,360 | 1,906 | | Equity incentive compensation | 5,606 | 5,426 | | Incentive fee | — | 77 | | **Total** | **14,545** | **15,579** | - Lismore advisory fees: the company entered an agreement with Lismore, an Ashford Inc. subsidiary, to seek loan modifications, forbearances, or refinancings, paying up to **50 basis points** in advisory fees; as of September 30, 2020, approximately **$4.1 million** was paid to Lismore, with **$1.3 million** recorded in "other assets"[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[122](index=122&type=chunk) - Ashford Securities: the company co-invested with Ashford Inc. to form Ashford Securities for retail capital raising; as of September 30, 2020, Braemar had contributed approximately **$996 thousand**[123](index=123&type=chunk) - Enhanced Return Funding Program (ERFP): Ashford LLC provides up to **$50 million** (expandable to **$100 million**) in funding to facilitate property acquisitions, with each funding representing **10%** of the property acquisition price[125](index=125&type=chunk)[126](index=126&type=chunk) - Project management agreements: the company contracts with Premier Project Management LLC (an Ashford Inc. subsidiary) for project management services, including construction management, interior design, and FF&E procurement, paying associated fees[128](index=128&type=chunk) - Hotel management agreements: Remington Hotels (an Ashford Inc. subsidiary) manages **3 of the company's 13 hotels**, with the company paying monthly hotel management fees (approximately **$14 thousand per hotel** or **3% of gross revenue**) and annual incentive management fees[129](index=129&type=chunk)[130](index=130&type=chunk) [15. Commitments and Contingencies](index=37&type=section&id=15.%20Commitments%20and%20Contingencies) The company faces various commitments and contingencies, including restricted cash, hotel management fee obligations, income tax examinations, and multiple lawsuits, notably an Accor management agreement dispute, California employment law class actions, and an SEC administrative subpoena; management believes the ultimate resolution of these matters, except for specific litigation, will not materially adversely affect the consolidated financial position or results of operations - Restricted cash: required escrow payments for insurance, real estate taxes, and debt service, and capital improvement reserves of **4% to 5% of gross revenue** under hotel management and debt agreements[134](index=134&type=chunk) - Hotel management fees: under hotel management agreements, the company pays monthly hotel management fees (approximately **$14 thousand per hotel** or **2.5% to 7.0% of gross revenue**) and annual incentive management fees, with agreement terms ranging from December 2023 to December 2065[135](index=135&type=chunk) - Income taxes: tax years 2016 through 2019 remain subject to examination by federal and various state tax authorities[138](index=138&type=chunk) - Accor management agreement litigation: the company is in litigation with Accor regarding a breach of the management agreement for the Sofitel Chicago Magnificent Mile hotel, involving a dispute over "cure amounts" for failing performance tests[139](index=139&type=chunk) - California employment law litigation: a hotel management company associated with the company is involved in multiple lawsuits concerning California hotel employment policies and practices, with one class action potentially costing the company **$300 thousand to $500 thousand**; another class action has been certified, but potential losses cannot be reasonably estimated[140](index=140&type=chunk)[142](index=142&type=chunk) - SEC investigation: the company, Ashford Trust, Ashford Inc., and Lismore received SEC administrative subpoenas in June 2020, requesting documents and information related to related party transactions, accounting policies, and internal controls since January 1, 2018; company Chairman Monty J. Bennett also received a similar subpoena[141](index=141&type=chunk) [16. Segment Reporting](index=39&type=section&id=16.%20Segment%20Reporting) The company operates solely within one business segment: direct hotel investments, reporting operating results on an aggregated basis due to similar economic characteristics and long-term financial performance across all hotel properties, which are all located in the U.S. and its territories as of September 30, 2020 - Business segment: direct hotel investments, referring to owning hotel properties through acquisition or new development[145](index=145&type=chunk) - Reporting basis: all hotel investments share similar economic characteristics and long-term financial performance, thus operating results are reported on an aggregated basis[145](index=145&type=chunk) - Geographical location: as of September 30, 2020, and December 31, 2019, all hotel properties are located in the U.S. and its territories[145](index=145&type=chunk) [17. Correction of Immaterial Error](index=39&type=section&id=17.%20Correction%20of%20Immaterial%20Error) The company corrected an immaterial accounting error related to distressed debt restructuring, where default interest and late fees were improperly expensed instead of capitalized and amortized, resulting in a **$4.6 million** increase in interest expense for the three and six months ended June 30, 2020, and corresponding impacts on net income (loss) and EPS - Error nature: incorrect accounting treatment of default interest and late fees in distressed debt restructuring, which should have been capitalized and amortized instead of immediately expensed[146](index=146&type=chunk) - Error impact: the error amounted to **$4.6 million** for the three and six months ended June 30, 2020[146](index=146&type=chunk) - Correction impact: resulted in a **$4.6 million** increase in interest expense for the three and six months ended June 30, 2020, with corresponding adjustments to net income (loss) and earnings (loss) per share[148](index=148&type=chunk) - Management assessment: management assessed that the error's impact on the company's consolidated financial statements was **immaterial**[147](index=147&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=42&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition, liquidity, and operational performance, including the impact of COVID-19, key performance indicators, and non-GAAP financial measures [Overview](index=43&type=section&id=Overview) Braemar Hotels & Resorts Inc. is a Maryland-based REIT focused on investing in high-RevPAR luxury hotels and resorts, owning 13 properties through Braemar OP as of September 30, 2020, with advisory and asset management services provided by Ashford LLC - Company positioning: a REIT investing in **high-RevPAR luxury hotels and resorts**[160](index=160&type=chunk) - Investment portfolio: as of September 30, 2020, owns **13 hotel properties** with **3,722 guestrooms**, primarily located in U.S. urban and resort areas[161](index=161&type=chunk) - Management structure: Ashford LLC provides advisory and asset management services, and the company engages hotel management companies for operations rather than direct management[163](index=163&type=chunk)[164](index=164&type=chunk) - Related parties: Ashford Inc. and its subsidiaries (including Ashford LLC and Remington Hotels) provide various products and services; company Chairman Monty J. Bennett and his father Archie Bennett, Jr. hold significant equity in both Ashford Inc. and the company[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) [Recent Developments](index=44&type=section&id=Recent%20Developments) This section outlines recent events and their impact on the company, particularly focusing on the effects of the COVID-19 pandemic, management's strategic responses, and the company's liquidity position [COVID-19, Management's Plans and Liquidity](index=44&type=section&id=COVID-19,%20Management's%20Plans%20and%20Liquidity) The COVID-19 pandemic severely impacted operations and liquidity, leading to significant declines in occupancy and RevPAR; the company responded by drawing down credit, suspending dividends, cutting expenses, and securing forbearance agreements, alleviating going concern doubts - COVID-19 impact: significant decline in occupancy and RevPAR since late February 2020, with 11 hotels temporarily suspending operations, expected to materially negatively impact operations, financial condition, and cash flows for the remainder of 2020 and 2021[169](index=169&type=chunk) - Liquidity measures: fully drew down **$75 million** secured revolving credit facility (later converted to a term loan), suspended common stock cash dividends, reduced annual capital expenditures to approximately **$25 million**, and significantly cut hotel operating expenses[169](index=169&type=chunk)[172](index=172&type=chunk) - Debt defaults and waivers: almost all loan agreements were in default for interest payments starting April 1, 2020, but through forbearance and other agreements with lenders, all loans were no longer in default as of September 30, 2020[171](index=171&type=chunk) - Cash position: as of September 30, 2020, the company held **$88.2 million** in unrestricted cash and **$34.7 million** in restricted cash; cash, cash equivalents, and restricted cash usage in Q3 was **$21.1 million**[174](index=174&type=chunk) - Going concern assessment: management believes significant doubt about the company's ability to continue as a going concern has been alleviated based on completed credit agreement amendments, forbearance agreements, existing cash, and operating projections for the next 12 months[175](index=175&type=chunk) - Lismore agreement: the company entered an agreement with Lismore Capital LLC to seek loan modifications, forbearances, or refinancings, paying advisory fees; as of September 30, 2020, approximately **$4.1 million** was paid to Lismore[178](index=178&type=chunk)[179](index=179&type=chunk) - Revolving credit facility converted to term loan: on June 8, 2020, the **$75 million** revolving credit facility was converted to a **$65 million** term loan, with modified financial covenant terms including a waiver of the fixed charge coverage ratio until March 31, 2021[180](index=180&type=chunk) [Key Indicators of Operating Performance](index=47&type=section&id=Key%20Indicators%20of%20Operating%20Performance) The company assesses hotel operating performance using key metrics such as occupancy, Average Daily Rate (ADR), and Revenue Per Available Room (RevPAR, a core measure of hotel operations), alongside non-GAAP financial measures like FFO, Adjusted FFO, EBITDAre, and Adjusted EBITDAre - Occupancy: measures the utilization of available hotel rooms[184](index=184&type=chunk) - Average Daily Rate (ADR): measures the average room price of a hotel[184](index=184&type=chunk) - Revenue Per Available Room (RevPAR): a core metric for hotel operations, calculated by multiplying ADR by occupancy, excluding non-room revenue like food and beverage[184](index=184&type=chunk) - RevPAR change impact: increased occupancy leads to higher variable operating costs, while increased ADR has a greater impact on operating margins and profitability[185](index=185&type=chunk) - Non-GAAP financial measures: FFO, Adjusted FFO, EBITDAre, and Adjusted EBITDAre are used to evaluate operating performance[187](index=187&type=chunk) - Accounting error correction: the company corrected an accounting error related to default interest and late fees in distressed debt restructuring, leading to increased interest expense and affecting FFO and Adjusted FFO[187](index=187&type=chunk) [RESULTS OF OPERATIONS](index=49&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed comparison of the company's operating results for the three and nine months ended September 30, 2020, against the corresponding periods in 2019, highlighting the impact of the COVID-19 pandemic on revenue, expenses, and profitability [Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019](index=49&type=section&id=Three%20Months%20Ended%20September%2030,%202020%20Compared%20to%20Three%20Months%20Ended%20September%2030,%202019) In Q3 2020, total revenue declined by **62.4%** to **$44,754 thousand** due to COVID-19, expanding net loss to **$18,677 thousand**, despite a **7.8%** increase in ADR, as occupancy significantly dropped by **5,633 basis points**, and hotel operating expenses were substantially reduced 2020 Q3 vs 2019 Q3 Operating Results Comparison (Units: thousands of dollars, except percentages) | Indicator | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | Change Amount | Change Percentage | | :--------------------------------- | :------------------------------------ | :------------------------------------ | :------------ | :---------------- | | Total revenue | 44,754 | 118,884 | (74,130) | (62.4)% | | Total hotel operating expenses | 37,806 | 79,147 | 41,341 | 52.2% | | Operating income (loss) | (14,319) | 7,320 | (21,639) | (295.6)% | | Net income (loss) | (23,057) | (8,954) | (14,103) | (157.5)% | | Net income (loss) attributable to the company | (18,677) | (9,388) | (9,289) | (98.9)% | 2020 Q3 vs 2019 Q3 Hotel Key Performance Indicators Comparison | Indicator | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Occupancy | 26.88% | 83.21% | | ADR | $304.68 | $282.72 | | RevPAR | $81.89 | $235.24 | | Room revenue | $28,118 | $76,808 | | Total hotel revenue | $44,754 | $118,882 | - Room revenue decreased by **$48.7 million (63.4%)**, primarily due to a **5,633 basis point** decline in occupancy, partially offset by a **7.8%** increase in room rates[192](index=192&type=chunk) - Food and beverage revenue decreased by **$17.9 million (67.7%)**, and other hotel revenue decreased by **$7.6 million (48.3%)**, both primarily due to the COVID-19 pandemic[193](index=193&type=chunk)[194](index=194&type=chunk) - Hotel operating expenses (room, food and beverage, other operating expenses, and management fees) significantly decreased due to the pandemic-driven revenue decline[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - Insurance settlement and asset disposition gain: **$10.1 million** gain recognized in Q3 2020, primarily from the Hurricane Irma insurance settlement[204](index=204&type=chunk) - Interest expense and loan cost amortization decreased by **$4.8 million (35.1%)**, mainly due to lower LIBOR rates, partially offset by increased company term loan and default interest[207](index=207&type=chunk) - Unrealized gain on derivative instruments of **$3.6 million**, primarily from unrealized gains on interest rate floors and CMBX credit default swaps[211](index=211&type=chunk) [Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019](index=53&type=section&id=Nine%20Months%20Ended%20September%2030,%202020%20Compared%20to%20Nine%20Months%20Ended%20September%2030,%202019) For the nine months ended September 30, 2020, total revenue decreased by **52.1%** to **$175,169 thousand**, expanding net loss to **$79,538 thousand**, as occupancy fell by **4,844 basis points** despite an **11.5%** increase in ADR, and hotel operating expenses were substantially reduced, with **$10.1 million** in insurance settlement gains recognized 2020 YTD vs 2019 YTD Operating Results Comparison (Units: thousands of dollars, except percentages) | Indicator | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | Change Amount | Change Percentage | | :--------------------------------- | :----------------------------------- | :----------------------------------- | :------------ | :---------------- | | Total revenue | 175,169 | 365,913 | (190,744) | (52.1)% | | Total hotel operating expenses | 146,093 | 238,378 | 92,285 | 38.7% | | Operating income (loss) | (57,401) | 34,118 | (91,519) | (268.2)% | | Net income (loss) | (94,549) | (15,899) | (78,650) | (494.7)% | | Net income (loss) attributable to the company | (79,538) | (14,879) | (64,659) | (434.6)% | 2020 YTD vs 2019 YTD Hotel Key Performance Indicators Comparison | Indicator | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Occupancy | 31.11% | 79.55% | | ADR | $330.77 | $296.62 | | RevPAR | $102.90 | $235.97 | | Room revenue | $105,119 | $228,660 | | Total hotel revenue | $175,169 | $365,906 | - Room revenue decreased by **$123.5 million (54.0%)**, primarily due to a **4,844 basis point** decline in occupancy, partially offset by an **11.5%** increase in room rates[221](index=221&type=chunk) - Food and beverage revenue decreased by **$44.9 million (53.3%)**, and other hotel revenue decreased by **$22.3 million (42.1%)**, both primarily due to the COVID-19 pandemic[223](index=223&type=chunk)[224](index=224&type=chunk) - Hotel operating expenses (room, food and beverage, other operating expenses, and management fees) significantly decreased due to the pandemic-driven revenue decline[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) - Insurance settlement and asset disposition gain: **$10.1 million** gain recognized for the nine months ended September 30, 2020, primarily from the Hurricane Irma insurance settlement[236](index=236&type=chunk) - Interest expense and loan cost amortization decreased by **$3.7 million (8.9%)**, mainly due to lower LIBOR rates, partially offset by increased company term loan and default interest[239](index=239&type=chunk) - Unrealized gain on derivative instruments of **$3.7 million**, primarily from unrealized gains on interest rate floors and CMBX credit default swaps[242](index=242&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=57&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's liquidity position, capital resources, and management's strategies to address financial needs, particularly in light of the COVID-19 pandemic and its impact on hotel operations [COVID-19, Management's Plans and Liquidity](index=57&type=section&id=COVID-19,%20Management's%20Plans%20and%20Liquidity) The COVID-19 pandemic severely impacted liquidity, leading to reduced hotel operations; the company responded by drawing down credit, suspending dividends, cutting expenses, and securing forbearance agreements, alleviating going concern doubts with **$88.2 million** in unrestricted cash and **$34.7 million** in restricted cash as of September 30, 2020 - COVID-19 impact: significant decline in occupancy and RevPAR, with 11 hotels temporarily suspending operations, expected to materially negatively impact operations, financial condition, and cash flows for the remainder of 2020 and 2021[247](index=247&type=chunk) - Liquidity measures: fully drew down **$75 million** secured revolving credit facility (later converted to a term loan), suspended common stock cash dividends, reduced annual capital expenditures to approximately **$25 million**, and significantly cut hotel operating expenses[247](index=247&type=chunk)[251](index=251&type=chunk) - Debt defaults and waivers: almost all loan agreements were in default for interest payments starting April 1, 2020, but through forbearance and other agreements with lenders, all loans were no longer in default as of September 30, 2020[248](index=248&type=chunk) - Cash position: as of September 30, 2020, the company held **$88.2 million** in unrestricted cash and **$34.7 million** in restricted cash; cash, cash equivalents, and restricted cash usage in Q3 was **$21.1 million**[253](index=253&type=chunk) - Going concern assessment: management believes significant doubt about the company's ability to continue as a going concern has been alleviated based on completed credit agreement amendments, forbearance agreements, existing cash, and operating projections for the next 12 months[254](index=254&type=chunk) - Short-term liquidity needs: primarily include operating expenses, advisory fees, maintenance expenses, debt interest and principal payments, REIT dividends, and preferred stock dividends[255](index=255&type=chunk) - Long-term liquidity needs: primarily for acquisitions, redevelopments, renovations, and capital expenditures, expected to be met through equity offerings, operating cash flow, insurance proceeds, and debt financing[258](index=258&type=chunk) - Cash trap provisions: some loan agreements contain cash trap provisions that may be triggered by declining hotel performance, potentially impacting the company's liquidity[262](index=262&type=chunk) - Stock repurchase program: board approved a **$50 million** stock repurchase program, with **$50 million** remaining authorized and unused as of September 30, 2020[263](index=263&type=chunk) - "At-the-market" common stock equity distribution program: as of September 30, 2020, **3 million** common shares were issued, generating **$7.7 million** in gross proceeds[264](index=264&type=chunk) - Non-traded preferred stock offering: S-3 registration statement filed for planned offerings of Series E and Series M redeemable preferred stock, not yet issued as of November 5, 2020[265](index=265&type=chunk) - Series B cumulative convertible preferred stock issuance: approximately **63,000 shares** issued through an "at-the-market" equity offering program, generating approximately **$1.2 million** in gross proceeds[266](index=266&type=chunk)[268](index=268&type=chunk) - Dividend policy: common stock dividend payments suspended in 2020, with the board continuing to review the dividend policy[269](index=269&type=chunk) [Secured Revolving Credit Facility and Secured Term Loan](index=60&type=section&id=Secured%20Revolving%20Credit%20Facility%20and%20Secured%20Term%20Loan) The company's **$75 million** secured revolving credit facility was converted to a **$65 million** secured term loan on June 8, 2020, featuring a LIBOR plus **3.50%** interest rate, quarterly **$5 million** principal amortization, and revised financial covenants including a fixed charge coverage ratio waiver until March 31, 2021, and new minimum liquidity requirements - Credit facility conversion: on June 8, 2020, the **$75 million** secured revolving credit facility was converted to a **$65 million** secured term loan[277](index=277&type=chunk) - Interest rate: term loan interest rate is LIBOR plus **3.50%** or base rate plus **2.50%** (until June 30, 2021)[277](index=277&type=chunk) - Principal amortization: quarterly principal amortization of **$5 million** added, starting March 31, 2021[277](index=277&type=chunk) - Financial covenant modifications: waiver of the Consolidated Fixed Charge Coverage Ratio until March 31, 2021, and a new minimum liquidity (unrestricted cash) requirement of **$20 million**[278](index=278&type=chunk) - Restrictions: until June 30, 2021, the company is restricted from incurring additional debt, placing liens, making restricted payments, selling assets, making capital expenditures, or additional investments[279](index=279&type=chunk) - Mandatory prepayments: **50%** of net proceeds from asset sales, equity offerings, or debt incurrence must be used for prepayment, with **25%** of the first **$50 million** of net proceeds from common stock offerings also required for prepayment[279](index=279&type=chunk) - Compliance: as of September 30, 2020, the company was in compliance with all covenants[279](index=279&type=chunk) [Sources and Uses of Cash](index=61&type=section&id=Sources%20and%20Uses%20of%20Cash) As of September 30, 2020, cash and cash equivalents totaled **$88.2 million**; for the nine months ended September 30, 2020, operating activities used **$35.6 million**, investing activities used **$18.9 million**, and financing activities provided **$47.1 million**, with cash flows influenced by the COVID-19 pandemic, hotel operations, and working capital timing - Cash and cash equivalents: **$88.2 million** as of September 30, 2020, compared to **$72.0 million** as of December 31, 2019[280](index=280&type=chunk) - Operating cash flow: outflow of **$35.6 million** for the nine months ended September 30, 2020, compared to an inflow of **$48.7 million** in the prior-year period, primarily impacted by the COVID-19 pandemic and changes in hotel operations[281](index=281&type=chunk) - Investing cash flow: outflow of **$18.9 million** for the nine months ended September 30, 2020, primarily for capital improvements of **$21.5 million**, partially offset by insurance proceeds of **$2.5 million**[282](index=282&type=chunk) - Financing cash flow: inflow of **$47.1 million** for the nine months ended September 30, 2020, mainly from borrowings of **$109.3 million** and net proceeds from common stock issuance of **$6.4 million**, partially offset by debt repayments of **$46.0 million** and dividend payments of **$13.6 million**[283](index=283&type=chunk)[284](index=284&type=chunk) [Seasonality](index=62&type=section&id=Seasonality) The company's hotel operations are seasonal, leading to quarterly rental revenue fluctuations, which can be further impacted by uncontrollable events like COVID-19, extreme weather, and economic factors; the company plans to use available cash, borrowings, and common stock to meet REIT distribution requirements - Seasonality patterns: hotel operations are seasonal, causing fluctuations in quarterly rental revenue[286](index=286&type=chunk) - Adverse factors: COVID-19 pandemic, government travel restrictions, extreme weather, natural disasters, terrorist attacks, and economic factors may adversely affect quarterly revenue[286](index=286&type=chunk) - Funding sources: expects to utilize cash on hand, borrowings, and common stock to meet REIT distribution requirements[286](index=286&type=chunk) [Contractual Obligations and Commitments](index=62&type=section&id=Contractual%20Obligations%20and%20Commitments) The company defaulted on interest payments for almost all loan agreements after April 1, 2020, but resolved these defaults through forbearance and other agreements with lenders by September 30, 2020, and also addressed rent payment defaults on two ground leases - Debt defaults: starting April 1, 2020, the company defaulted on interest payments for almost all loan agreements, constituting "events of default"[287](index=287&type=chunk) - Default resolution: defaults were resolved through forbearance and other agreements with lenders, with all loans no longer in default as of September 30, 2020[287](index=287&type=chunk) - Ground leases: the company failed to pay rent on two ground leases but resolved potential default events through forbearance agreements and rent deferral letters, with rent payments current as of September 30, 2020[288](index=288&type=chunk) [Off-Balance Sheet Arrangements](index=62&type=section&id=Off-Balance%20Sheet%20Arrangements) The company may form or invest in partnerships or joint ventures in the normal course of business, evaluating them as Variable Interest Entities (VIEs) to determine consolidation requirements, but has no other off-balance sheet arrangements - Partnerships/Joint Ventures: the company evaluates whether they are Variable Interest Entities (VIEs) to determine consolidation requirements[289](index=289&type=chunk) - No other off-balance sheet arrangements[289](index=289&type=chunk) [Critical Accounting Policies](index=63&type=section&id=Critical%20Accounting%20Policies) The preparation of the company's financial statements requires management's estimates and assumptions; no significant changes to critical accounting policies are noted in this report, with detailed policies available in the company's 2019 Form 10-K report - Estimates and assumptions: financial statement preparation requires management to make estimates and assumptions, and actual results may differ from these estimates[291](index=291&type=chunk) - No significant changes: no significant changes to critical accounting policies are noted in this report, with detailed policies available in the company's 2019 Form 10-K report[291](index=291&type=chunk) [Non-GAAP Financial Measures](index=63&type=section&id=Non-GAAP%20Financial%20Measures) The company utilizes non-GAAP financial

Financial Data and Key Metrics Changes - The company reported a net loss attributable to common stockholders of $18.7 million, or $0.55 per diluted share for Q3 2020 [24] - Adjusted EBITDA for the quarter was negative $3.1 million, with AFFO per diluted share at negative $0.15 [24] - Total assets at quarter's end were $1.7 billion, with $1.1 billion in mortgage loans and a blended average interest rate of 2.5% [25] - Cash and cash equivalents totaled $88.2 million, with restricted cash of $34.7 million [26] Business Line Data and Key Metrics Changes - All hotels achieved positive hotel EBITDA for the quarter, with resort properties showing strong occupancy performance of over 48% [12] - Comparable RevPAR for the portfolio decreased by 65.6%, while resort hotels saw a smaller decline of 37% [35] - The Ritz-Carlton Sarasota had a hotel EBITDA increase of over 500% compared to the prior year period [38] Market Data and Key Metrics Changes - The company noted that leisure demand is holding up well, particularly on weekends, while corporate transient demand remains weak [13] - Urban assets experienced RevPAR declines of up to 91%, contrasting with the positive performance of resort hotels [36] Company Strategy and Development Direction - The company is focused on maintaining liquidity and has reduced corporate expenses by approximately 25% [21] - A strategic repositioning of the Courtyard San Francisco Downtown into The Clancy was completed, with over $30 million invested [18] - The company plans to preserve cash until there is more clarity on the recovery of the economy [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery trajectory, noting that October occupancy was tracking ahead of September [52] - The company is encouraged by the positive feedback from guests and the reopening of all hotels [15] - Future performance is expected to improve as corporate transient demand and group demand recover post-vaccination [13] Other Important Information - The company settled an insurance claim related to the Ritz-Carlton St. Thomas for a total of $123.5 million [23] - The company has signed forbearance agreements on six loans to manage operating shortfalls [27] Q&A Session Summary Question: Demand trends post Labor Day and in October - Management noted that October is tracking several occupancy points ahead of September, with strong ADR [52] Question: Revenue management strategy and rate environment - The company is holding firm on rates due to the quality of its assets and the demand for travel [56] Question: Performance of St. Thomas and likelihood of future shutdowns - Management indicated that the island has reopened and is performing well, with positive hotel EBITDA despite previous shutdowns [59][60] Question: Strategy for urban hotels facing RevPAR declines - The company is focusing on cost-cutting and leveraging leisure demand while waiting for corporate travel to recover [67][68] Question: Future acquisition plans - The company is monitoring the market but will not pursue acquisitions until achieving positive cash flow [73]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission file number: 001-35972 BRAEMAR HOTELS & RESORTS INC. (Exact name of registrant as specified in its charter) (State or othe ...

Braemar Hotels & Resorts, Inc. (NYSE:BHR) Q2 2020 Results Earnings Conference Call July 31, 2020 11:00 AM ET Company Participants Jordan Jennings - Manager Investor Relations Richard Stockton - President and Chief Executive Officer Deric Eubanks - Chief Financial Officer Jeremy Welter - Chief Operating Officer Conference Call Participants Bryan Maher - B. Riley FBR Tyler Batory - Janney Capital Markets Operator Hello, and welcome to Braemar Hotels & Resorts Second Quarter 2020 Results Call [Operator Instruc ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission file number: 001-35972 BRAEMAR HOTELS & RESORTS INC. (Exact name of registrant as specified in its charter) (State or oth ...

Braemar Hotels & Resorts, Inc. (NYSE:BHR) Q1 2020 Earnings Conference Call May 22, 2020 11:00 AM ET Company Participants Jordan Jennings - Manager Investor Relations Richard Stockton - President and Chief Executive Officer Deric Eubanks - Chief Financial Officer Jeremy Welter - Chief Operating Officer Conference Call Participants Bryan Maher - B. Riley FBR Tyler Batory - Janney Capital Markets Chris Woronka - Deutsche Bank Barry Oxford - D.A. Davidson Amanda Sweitzer - Baird Operator Greetings, and welcome ...

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) The company is a Maryland REIT investing in high RevPAR luxury hotels, advised by Ashford LLC, with 13 properties totaling 3,722 rooms [Our Company](index=4&type=section&id=Our%20Company) Braemar Hotels & Resorts Inc. is a Maryland REIT focused on luxury hotels, advised by Ashford LLC, and impacted by COVID-19 - Braemar Hotels & Resorts Inc., formed in 2013, invests primarily in high RevPAR luxury hotels and resorts and has elected to be taxed as a REIT[11](index=11&type=chunk) - As of March 10, 2020, the company owned interests in **thirteen hotel properties** with **3,722 total rooms** (**3,487 net rooms**), predominantly in U.S. urban and resort locations[11](index=11&type=chunk) - Ashford LLC, a subsidiary of Ashford Inc., serves as the company's advisor, providing asset management functions including acquisitions, renovations, financing, and operational oversight[11](index=11&type=chunk) - The company does not directly operate its hotels; Remington Hotels, an Ashford Inc. subsidiary, manages **three properties**, with third-party companies managing the rest[11](index=11&type=chunk) - The company no longer qualifies as an 'emerging growth company' as of December 31, 2019, subjecting it to increased disclosure and compliance requirements[12](index=12&type=chunk) - The COVID-19 pandemic has caused a significant and rapid decline in hotel revenue, occupancy, and RevPAR across the portfolio, leading to substantial erosion in hotel cash flow[12](index=12&type=chunk) [Our Investment and Growth Strategies](index=6&type=section&id=Our%20Investment%20and%20Growth%20Strategies) The company aims for attractive returns and long-term cash flow growth through focused investment and active asset management - The company's principal business objectives are to generate attractive returns on invested capital and long-term growth in cash flow to maximize stockholder returns[13](index=13&type=chunk) - The focused investment strategy targets premium branded and high-quality independent luxury hotels and resorts in North America with anticipated RevPAR at least **twice the U.S. lodging industry average**[13](index=13&type=chunk) - An active asset management strategy involves Ashford LLC maximizing operating performance, cash flow, and value by closely monitoring hotel managers, expenses, and implementing cost-cutting and revenue-driving initiatives[13](index=13&type=chunk) - A disciplined capital allocation strategy guides the acquisition, operation, disposition, and financing of assets, with selective sales of properties that no longer align with the investment strategy or have maximized returns[13](index=13&type=chunk)[14](index=14&type=chunk) [Our Hotels](index=7&type=section&id=Our%20Hotels) The company owns a diverse portfolio of thirteen high-quality luxury hotels, with performance data detailed for 2019 - As of March 10, 2020, the company owns interests in a geographically diverse portfolio of **thirteen high-quality hotel properties** with **3,722 total rooms** (**3,487 net rooms**)[15](index=15&type=chunk) - **Eight of the thirteen hotels** operate under premium brands affiliated with Marriott International and Hilton Worldwide, with others managed by Accor, Hyatt, and Remington Hotels[15](index=15&type=chunk) - For the year ended December 31, 2019, approximately **76% of rooms revenue** came from transient business, **23% from group sales**, and **1% from contract sales**[15](index=15&type=chunk) Hotel Property Performance (Year Ended December 31, 2019) | Hotel Property | Location | Total Rooms | % Owned | Occupancy | ADR | RevPAR | Hotel EBITDA (1) | |:---|:---|:---|:---|:---|:---|:---|:---| | Hilton La Jolla Torrey Pines (2) | La Jolla, CA | 394 | 75% | 83.06% | $216.18 | $179.56 | $15,695 | | Capital Hilton | Washington, D.C. | 550 | 75% | 82.95% | $232.62 | $192.95 | $14,141 | | Seattle Marriott Waterfront | Seattle, WA | 361 | 100% | 83.22% | $266.62 | $221.87 | $14,250 | | Courtyard San Francisco Downtown (3) | San Francisco, CA | 410 | 100% | 89.99% | $301.30 | $271.14 | $14,248 | | The Notary Hotel | Philadelphia, PA | 499 | 100% | 72.15% | $197.97 | $142.84 | $9,850 | | Ritz-Carlton, Lake Tahoe (4) | Truckee, CA | 170 | 100% | 67.39% | $556.11 | $374.76 | $7,286 | | Ritz-Carlton, Sarasota | Sarasota, FL | 266 | 100% | 73.40% | $391.92 | $287.68 | $13,626 | | Chicago Sofitel Magnificent Mile | Chicago, IL | 415 | 100% | 82.35% | $203.34 | $167.46 | $7,169 | | Pier House Resort | Key West, FL | 142 | 100% | 82.14% | $451.84 | $371.12 | $11,700 | | Bardessono Hotel (5) | Yountville, CA | 65 | 100% | 75.11% | $792.41 | $595.19 | $5,610 | | Ritz-Carlton, St. Thomas (6) | St. Thomas, U.S. Virgin Islands | 180 | 100% | 48.61% | $616.91 | $299.87 | $11,399 | | Park Hyatt Beaver Creek | Beaver Creek, CO | 190 | 100% | 59.06% | $444.54 | $262.57 | $10,142 | | Hotel Yountville | Yountville, CA | 80 | 100% | 73.91% | $558.52 | $412.82 | $6,202 | | **Total / Weighted Average (7)** | | **3,722** | | **78.85%** | **$294.93** | **$232.56** | **$141,318** | [Asset Management](index=20&type=section&id=Asset%20Management) Ashford LLC's team provides asset management services, maximizing profitability and monitoring hotel operations - Ashford LLC's senior management team provides all asset management services, including for properties acquired after the spin-off from Ashford Trust[69](index=69&type=chunk) - The asset management team proactively works with third-party hotel management companies and Remington Hotels to maximize profitability by monitoring performance, reviewing budgets, and identifying ROI initiatives[69](index=69&type=chunk) - The company retains approval rights on key staffing positions (e.g., general manager, director of sales) at many hotels to ensure operational standards and asset value preservation[69](index=69&type=chunk) [Hotel Management](index=21&type=section&id=Hotel%20Management) Remington Hotels, an Ashford Inc. subsidiary, provides comprehensive hotel management services for the company's properties - Following Ashford Inc.'s November 2019 acquisition of Remington Lodging's hotel management business, Remington Hotels (an Ashford Inc. subsidiary) now provides hotel management services to the company[71](index=71&type=chunk) - These services include hotel operations, sales and marketing, revenue management, budget oversight, guest service, and asset maintenance (excluding capital expenditures)[71](index=71&type=chunk) [Project Management](index=21&type=section&id=Project%20Management) Ashford Inc.'s subsidiary, Premier, offers project management services including construction, design, and FF&E supervision - Ashford Inc., through its subsidiary Premier (acquired August 2018), provides project management services to the company[72](index=72&type=chunk) - Services include construction management, interior design, architectural oversight, and purchasing/installation supervision of furniture, fixtures, and equipment (FF&E)[72](index=72&type=chunk) [Third-Party Agreements](index=21&type=section&id=Third-Party%20Agreements) The company has various agreements with brand companies and affiliates for hotel management, advisory, and project management services - **Ten of the company's hotel properties** are operated under management agreements with four brand hotel management companies (Marriott, Hilton, Accor, Hyatt), and **three by Remington Hotels** (an Ashford Inc. subsidiary)[73](index=73&type=chunk) - Each hotel management company receives a base management fee (**2.0%-7.0% of gross revenues**) and an incentive management fee if hotel operating income exceeds certain thresholds[73](index=73&type=chunk)[92](index=92&type=chunk) - The Ritz-Carlton, St. Thomas is subject to a License and Royalty Agreement allowing use of the Ritz-Carlton brand for **fifty years**, with a royalty fee of **2.6% of gross revenues** and an incentive royalty of **20% of operating profit** in excess of owner's priority[73](index=73&type=chunk) [Hotel Management Agreements](index=27&type=section&id=Hotel%20Management%20Agreements) Management agreements with brand companies and Remington Hotels detail base and incentive fees for hotel operations - **Ten hotel properties** are managed by brand companies (Hilton, Marriott, Accor, Hyatt), and **three by Remington Hotels** (Ashford Inc. subsidiary)[73](index=73&type=chunk)[90](index=90&type=chunk) - Management fees range from **2.0% to 7.0% of gross revenues**, plus incentive fees based on hotel operating income exceeding thresholds[92](index=92&type=chunk) Hotel Management Agreement Terms (Base and Incentive Fees) | Hotel | Management Fee (1) | Incentive Fee | |:---|:---|:---| | Hilton La Jolla Torrey Pines | 3% | 20% of operating cash flow (after deduction for capital renewals reserve and owner's priority) | | Capital Hilton | 3% | 20% of operating cash flow (after deduction for capital renewals reserve and owner's priority) | | Seattle Marriott Waterfront (3) | 2% | After payment of owner's 1st priority, remaining operating profit is split between owner and manager, such that manager receives 30% of remaining operating profit that is less than the sum of $15,133,000 plus 10.75% of owner-funded capital expenses, and 50% of the operating profit in excess of such sum | | Courtyard San Francisco Downtown | 7% | 50% of the excess of operating profit (after deduction for contributions to the FF&E reserve) over owner's priority | | The Notary Hotel | 4.0% | 20% of the excess of operating profit over owner's priority | | Chicago Sofitel Magnificent Mile | 3% | 20% of the amount by which the hotel's annual net operating income exceeds a threshold amount (equal to 8% of our total investment in the hotel), capped at 2.5% of gross hotel revenues | | Pier House Resort | Greater of $14,104.81 monthly or 3% | The lesser of 1% of gross revenues or the amount by which actual house profit exceeds budgeted house profit | | Bardessono Hotel | Greater of $14,104.81 monthly or 3% | The lesser of 1% of gross revenues or the amount by which actual house profit exceeds budgeted house profit | | Ritz-Carlton, St. Thomas | 3.0% (0.4% management, 2.6% royalty) | 20% of the excess, if any, of Operating Profit for such Fiscal Year over Owner's Priority for such Fiscal Year | | Park Hyatt Beaver Creek | Greater of 3.0% or $2,035,009 (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 | | Hotel Yountville | Greater of $14,104.81 monthly or 3% | The lesser of 1% of gross revenues or the amount by which actual house profit exceeds budgeted house profit | | Ritz-Carlton, Sarasota | 3% | 20% of Available cash flow defined as Net Operating Income minus the Owner's Priority | | Ritz-Carlton, Lake Tahoe | 3% | The sum of (i) 15% by which Adjusted House Profit ("AHP") for such Fiscal Year exceeds the Owner's Priority but is less than $10.8 million plus (ii) 20% of the amount by which AHP exceeds $10.8 million; provided, however, that in no event shall the total, aggregate sum of the Base Fee and the Incentive Fee paid to Operator in any given year exceed 2.5% of gross revenues | [Marriott Management Agreements](index=30&type=section&id=Marriott%20Management%20Agreements) Marriott agreements feature long terms, performance termination rights, and a right of first negotiation for hotel sales - Marriott management agreements have remaining base terms of **8 to 46 years**, with automatic extension options for the manager (two to five **10-year extensions**)[98](index=98&type=chunk) - Performance termination rights allow the company to terminate without a fee if operating profit and RevPAR penetration index fall below specified thresholds for **two consecutive fiscal years**, unless due to extraordinary events or major renovations[100](index=100&type=chunk) - Marriott has a right of first negotiation for hotel sales, and sales are subject to conditions including the purchaser not being a competitor and having sufficient financial resources[100](index=100&type=chunk) [Hilton Management Agreements](index=31&type=section&id=Hilton%20Management%20Agreements) Hilton agreements include extension options, performance termination clauses, and a right of first negotiation for sales - Hilton management agreements have been extended through December 31, 2023, with **three remaining 10-year automatic extension options** at the manager's discretion[101](index=101&type=chunk) - Performance termination rights exist if operating cash flow is less than **85% of the owner's priority return** and the hotel's yield index is below **90% for two consecutive fiscal years**[103](index=103&type=chunk) - The manager can cure a performance default by paying the deficiency, but only up to **four times per initial or extension term**[103](index=103&type=chunk) - Hilton management agreements include a right of first negotiation for hotel sales or leases, requiring the manager to respond within **30 days**[103](index=103&type=chunk) [Accor Management Agreement](index=32&type=section&id=Accor%20Management%20Agreement) The Accor agreement has renewal terms, performance termination rights, and specific assignment conditions - The Accor management agreement for the Chicago Sofitel Magnificent Mile expires December 31, 2030, with **three consecutive 10-year renewal terms**[105](index=105&type=chunk) - Performance termination allows the company to terminate without a fee if RevPAR is less than **90% of the competitive set** and adjusted net operating income is negative for **two consecutive operating years**[105](index=105&type=chunk) - The manager has a right to cure performance termination up to **three times in any eight-year period** by paying a cure amount[105](index=105&type=chunk) - Assignment of the agreement without consent is permitted to affiliates or persons meeting specific criteria (not a competitor, good repute, minimum net worth)[105](index=105&type=chunk) [Hyatt Beaver Creek Management Agreement](index=34&type=section&id=Hyatt%20Beaver%20Creek%20Management%20Agreement) The Hyatt agreement includes extension options and termination rights for casualty or eminent domain, with sale requiring Hyatt approval - The Hyatt Beaver Creek management agreement was extended through December 31, 2029, with **one remaining 10-year extension option**[107](index=107&type=chunk) - The company can terminate for substantial damage by casualty (cost >= **25% of replacement cost if insured**, **10% if uninsured**) or if the hotel is rendered untenantable by eminent domain[107](index=107&type=chunk) - Sale or assignment of the hotel requires prior Hyatt approval, which cannot be unreasonably withheld, based on the assignee's financial ability, reputation, and potential conflicts of interest[107](index=107&type=chunk) [Remington Hotels Master Hotel Management Agreement](index=34&type=section&id=Remington%20Hotels%20Master%20Hotel%20Management%20Agreement) The master agreement with Remington Hotels outlines management terms, fees, and termination conditions for managed properties - The master hotel management agreement with Remington Hotels (an Ashford Inc. subsidiary) governs management for the Pier House Resort, Bardessono Hotel, and Hotel Yountville, and future acquisitions[108](index=108&type=chunk) - The initial term is **10 years per hotel**, renewable by Remington Hotels for **three 7-year periods** and a final **4-year term**, subject to performance tests[108](index=108&type=chunk) - Remington Hotels receives a monthly base management fee (greater of **$14,105** or **3% of gross revenues**) and an annual incentive fee (lesser of **1% of gross revenues** or actual house profit exceeding target)[110](index=110&type=chunk) - Termination fees are payable in certain early termination scenarios (e.g., sale within first year, casualty after first year, or failure to satisfy performance test after cure period), but not for condemnation or force majeure[110](index=110&type=chunk)[111](index=111&type=chunk) [Our Financing Strategy](index=21&type=section&id=Our%20Financing%20Strategy) The company finances growth and liquidity through operating cash flow, equity, debt, and maintains a target leverage of 45% - As of December 31, 2019, property-level indebtedness was approximately **$1.1 billion**, with a weighted average interest rate of **4.04% per annum**, and **100% variable-rate debt** (LIBOR plus **2.28%**)[74](index=74&type=chunk) - The company intends to finance long-term growth and liquidity with operating cash flow, equity issuances (common and preferred stock), joint ventures, a revolving line of credit, and secured/unsecured debt[74](index=74&type=chunk) - A target leverage of **45% net debt to gross assets** is maintained; Lismore Capital LLC (an Ashford Inc. subsidiary) may provide debt placement services[74](index=74&type=chunk) [Certain Agreements](index=22&type=section&id=Certain%20Agreements) Various agreements govern advisory services, acquisition funding, project management, and property leasing with related parties - The company is advised by Ashford LLC under an advisory agreement, which outlines fees, expense reimbursements, and conflict of interest policies[77](index=77&type=chunk) - The ERFP Agreement, effective January 15, 2019, obligates Ashford LLC to provide up to **$50 million** (optionally **$100 million**) in funding for hotel acquisitions in exchange for FF&E, leased back rent-free[87](index=87&type=chunk) - Mutual exclusivity agreements with Remington Hotels and Premier grant the company a first right of refusal for certain lodging investment opportunities and obligate the company to engage them for management/project management services under specific conditions[124](index=124&type=chunk)[130](index=130&type=chunk) - The company's TRS lessees lease hotel properties under percentage leases, requiring a reserve account of at least **4% of gross revenues** for capital expenditures[136](index=136&type=chunk) [The Advisory Agreement](index=22&type=section&id=The%20Advisory%20Agreement) Ashford LLC advises the company, managing investments and operations under a long-term agreement with specific fee structures - Ashford LLC, a subsidiary of Ashford Inc., acts as the company's advisor, responsible for implementing investment strategies and managing day-to-day operations under board supervision[77](index=77&type=chunk) - The initial term of the advisory agreement expires January 24, 2027, with up to **seven successive 10-year extensions** at Ashford LLC's option[79](index=79&type=chunk) - The company pays a monthly base fee (**1/12th of 0.70% of total market capitalization** plus Net Asset Fee Adjustment, with a minimum) and an annual incentive fee based on total stockholder return exceeding a peer group average[80](index=80&type=chunk)[82](index=82&type=chunk) - The advisory agreement includes provisions to minimize conflicts of interest, requiring independent director approval for certain actions and giving the company a preferential right to investment opportunities that satisfy its guidelines[84](index=84&type=chunk) [ERFP Agreement](index=26&type=section&id=ERFP%20Agreement) The ERFP agreement obligates Ashford LLC to provide funding for hotel acquisitions in exchange for rent-free FF&E leases - The Enhanced Return Funding Program (ERFP) Agreement, effective January 15, 2019, replaced previous 'key money investments' and obligates Ashford LLC to provide up to **$50 million** (optionally **$100 million**) for hotel acquisitions[87](index=87&type=chunk) - Ashford LLC provides **10% of the acquired hotel's purchase price** in exchange for FF&E, which is then leased back to the company's TRSs on a rent-free basis[87](index=87&type=chunk) - Funding is conditional on Ashford LLC's unrestricted cash balance exceeding **$15 million** and the absence of material breaches of the advisory agreement[89](index=89&type=chunk) - The initial term is **two years**, automatically renewable for **one-year periods** unless notice of non-renewal is given; repayment of funded amounts is required if a Company Change of Control or advisory agreement termination occurs within **two years** of FF&E acquisition[89](index=89&type=chunk) [Premier Master Project Management Agreement](index=38&type=section&id=Premier%20Master%20Project%20Management%20Agreement) Premier provides project management services under a master agreement, with fees based on project costs and specific termination clauses - Premier, an Ashford Inc. subsidiary, provides project management services to all hotels under a master project management agreement, with an initial term of **10 years per hotel**[118](index=118&type=chunk) - Fees include a project management fee (**4% of total project costs**, reduced to **3% for costs exceeding 5% of gross revenues**) and additional fees for architectural, construction management, interior design, and FF&E purchasing services[119](index=119&type=chunk) - Termination fees are payable for early termination for convenience, but not for sale of a hotel, casualty, condemnation, or force majeure[120](index=120&type=chunk) [Mutual Exclusivity Agreements](index=40&type=section&id=Mutual%20Exclusivity%20Agreements) MEAs with Remington Hotels and Premier grant the company first refusal rights and obligate engagement for management/project services - The hotel management MEA with Remington Hotels grants the company a first right of refusal for certain lodging investment opportunities and requires the company to engage Remington Hotels for management services under specific conditions[124](index=124&type=chunk)[126](index=126&type=chunk) - The project management MEA with Premier similarly grants the company a first right of refusal for lodging investment opportunities and requires engaging Premier for project management services[130](index=130&type=chunk) - Both MEAs have an initial term of **10 years** from November 19, 2013, with automatic extensions for up to **35 years**[124](index=124&type=chunk)[130](index=130&type=chunk) - Material modification of investment guidelines without consent can lead to loss of exclusivity rights for the company[126](index=126&type=chunk)[130](index=130&type=chunk) [Ashford Trust Right of First Offer Agreement](index=44&type=section&id=Ashford%20Trust%20Right%20of%20First%20Offer%20Agreement) This agreement grants the company a first right to acquire Ashford Trust hotels and vice versa for portfolio transactions - The agreement grants the company the first right to acquire subject hotels owned by Ashford Trust if they are marketed for sale and meet the company's investment guidelines[133](index=133&type=chunk) - The company has **30 days** to agree to sale terms; if rejected, Ashford Trust can sell to a third party within **180 days** at not less than **95% of the offered price**[133](index=133&type=chunk) - The company also grants Ashford Trust a right of first offer for properties acquired in portfolio transactions that meet Ashford Trust's guidelines[135](index=135&type=chunk) - The agreement has an initial term of **10 years** with automatic **one-year renewals**, terminable upon default, bankruptcy, or a change of control (excluding spin-offs)[135](index=135&type=chunk) [TRS Leases](index=45&type=section&id=TRS%20Leases) Most hotels are leased to TRSs under percentage leases, requiring capital expenditure reserves and outlining termination conditions - Most acquired hotels are leased to Taxable REIT Subsidiaries (TRSs) under percentage leases, with terms ranging from **five years** (expiring between 2020 and 2023)[136](index=136&type=chunk) - TRS lessees pay base rent plus percentage rent based on gross revenue exceeding a threshold, and are required to fund a reserve account (at least **4% of gross revenues**) for capital expenditures[136](index=136&type=chunk) - The company is responsible for non-routine capital expenditures and property/casualty insurance, while TRS lessees handle routine repairs and other insurance[136](index=136&type=chunk)[138](index=138&type=chunk) - Leases can be terminated early due to specified damages, condemnation, sale of the hotel, or uncured events of default, potentially requiring termination fees[136](index=136&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Ground Leases](index=47&type=section&id=Ground%20Leases) Two hotels are subject to long-term ground leases with rent adjustments and extension options - **Two hotels**, Hilton La Jolla Torrey Pines and Bardessono Hotel, are subject to ground leases expiring in **2067 and 2065**, respectively[141](index=141&type=chunk) - Rent for ground leases is the greater of minimum rent or percentage rent, with annual adjustments based on actual rents or CPI[141](index=141&type=chunk) - The Hilton La Jolla Torrey Pines ground lease may be extended by **10 or 20 years** based on capital expenditures; the Bardessono Hotel lease has **two 25-year extension options**[141](index=141&type=chunk) [Regulation](index=48&type=section&id=Regulation) Hotels are subject to various federal, state, and local regulations, including ADA compliance and environmental laws - Hotels are subject to various U.S. federal, state, and local laws, including common area, fire, and safety requirements, and are believed to have necessary permits[143](index=143&type=chunk) - Compliance with the Americans with Disabilities Act (ADA) is required, potentially necessitating structural barrier removal and equivalent services for disabled persons, with non-compliance risking fines or damages[144](index=144&type=chunk) - Environmental laws may impose liability for contamination (hazardous substances, mold) regardless of fault, potentially leading to substantial cleanup costs, third-party liability, or adverse effects on property value/saleability[145](index=145&type=chunk)[146](index=146&type=chunk) - The hotel industry is highly competitive, based on location, brand, price, and services, facing competition from other hotels, less expensive accommodations, and home-sharing companies[148](index=148&type=chunk)[150](index=150&type=chunk) [Employees](index=49&type=section&id=Employees) The company has no direct employees, relying on Ashford LLC's 116 full-time staff for all operational functions - The company has no direct employees; all officers and services are provided by Ashford LLC, which has approximately **116 full-time employees** performing various functions[151](index=151&type=chunk) [Seasonality](index=49&type=section&id=Seasonality) Hotel operations are seasonal, causing quarterly fluctuations in revenue, with cash flows managed for REIT distribution requirements - Hotel operations are seasonal, with higher occupancy rates during summer or winter months, causing quarterly fluctuations in lease revenue[152](index=152&type=chunk) - Cash flows from operations are expected to be sufficient for quarterly distributions to maintain REIT status; shortfalls may be covered by cash on hand or borrowings[152](index=152&type=chunk) [Access to Reports and Other Information](index=49&type=section&id=Access%20to%20Reports%20and%20Other%20Information) The company provides SEC filings and corporate governance documents free on its website and the SEC's website - The company makes its SEC filings (10-K, 10-Q, 8-K) and corporate governance documents available free of charge on its website (www.bhrreit.com) and the SEC's website (www.sec.gov)[153](index=153&type=chunk) - Investors should monitor the company's website for company information, as it may be deemed material[153](index=153&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from economic downturns, dependence on Ashford LLC, acquisition challenges, REIT compliance, and stock price volatility - The company's business is highly susceptible to adverse economic conditions in its concentrated hotel markets (e.g., Washington D.C., San Francisco) and the overall hotel industry, particularly the luxury segment, which is more volatile during economic downturns[154](index=154&type=chunk)[157](index=157&type=chunk) - Dependence on Ashford LLC for operations and key personnel, along with potential conflicts of interest arising from shared management with Ashford Trust and Ashford Inc. subsidiaries (Remington Hotels, Premier), could adversely affect operating performance and decision-making[159](index=159&type=chunk)[160](index=160&type=chunk)[189](index=189&type=chunk)[191](index=191&type=chunk) - Growth is limited by the ability to acquire additional hotel properties on attractive terms amidst significant competition and the challenges of successfully integrating new acquisitions[161](index=161&type=chunk)[162](index=162&type=chunk) - A significant amount of variable-rate debt (**$1.1 billion** as of Dec 31, 2019) exposes the company to interest rate increases and refinancing risks, potentially limiting cash flow for distributions and increasing default risk[179](index=179&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk) - Failure to qualify or remain qualified as a REIT would result in corporate taxation, substantially reducing funds available for distributions and adversely affecting stock value[239](index=239&type=chunk) - The market price of common stock is volatile, influenced by operating results, market valuations, management changes, and future offerings of debt or equity securities that could dilute existing stockholders[258](index=258&type=chunk)[259](index=259&type=chunk) [Item 1B. Unresolved Staff Comments](index=77&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[263](index=263&type=chunk) [Item 2. Properties](index=77&type=section&id=Item%202.%20Properties) The company owns interests in thirteen consolidated hotel properties totaling 3,722 rooms across the U.S. and USVI, all encumbered by loans - The company leases its headquarters at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254[263](index=263&type=chunk) - As of December 31, 2019, the company owned interests in **thirteen consolidated hotel properties** (eleven directly owned, two through a **75% equity joint venture**), totaling **3,722 rooms** (**3,487 net rooms**) in the U.S. and U.S. Virgin Islands[264](index=264&type=chunk) - Each of the **thirteen hotel properties** is encumbered by loans[264](index=264&type=chunk) Hotel Property Information (December 31, 2019) | Hotel Property | Location | Total Rooms | % Owned | Owned Rooms | Occupancy | ADR | RevPAR | |:---|:---|:---|:---|:---|:---|:---|:---| | **Fee Simple Properties** | | | | | | | | | Capital Hilton | Washington D.C. | 550 | 75% | 413 | 82.95% | $232.62 | $192.95 | | Seattle Marriott Waterfront | Seattle, WA | 361 | 100% | 361 | 83.22% | $266.62 | $221.87 | | The Notary Hotel | Philadelphia, PA | 499 | 100% | 499 | 72.15% | $197.97 | $142.84 | | San Francisco Courtyard Downtown (1) | San Francisco, CA | 410 | 100% | 410 | 89.99% | $301.30 | $271.14 | | Chicago Sofitel Magnificent Mile | Chicago, IL | 415 | 100% | 415 | 82.35% | $203.34 | $167.46 | | Pier House Resort | Key West, FL | 142 | 100% | 142 | 82.14% | $451.84 | $371.12 | | Ritz-Carlton, St. Thomas (2) | St. Thomas, USVI | 180 | 100% | 180 | 48.61% | $616.91 | $299.87 | | Park Hyatt Beaver Creek | Beaver Creek, CO | 190 | 100% | 190 | 59.06% | $444.54 | $262.57 | | Hotel Yountville | Yountville, CA | 80 | 100% | 80 | 73.91% | $558.52 | $412.82 | | Ritz-Carlton, Sarasota | Sarasota, FL | 266 | 100% | 266 | 73.40% | $391.92 | $287.68 | | Ritz-Carlton, Lake Tahoe (3) | Truckee, CA | 170 | 100% | 170 | 67.39% | $556.11 | $374.76 | | **Ground Lease Properties** | | | | | | | | | Hilton La Jolla Torrey Pines (4) | La Jolla, CA | 394 | 75% | 296 | 83.06% | $216.18 | $179.56 | | Bardessono Hotel (5) | Yountville, CA | 65 | 100% | 65 | 75.11% | $792.41 | $595.19 | | **Total** | | **3,722** | | **3,487** | **78.85%** | **$294.93** | **$232.56** | [Item 3. Legal Proceedings](index=78&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in legal proceedings, including a dispute with Accor, with management believing no material adverse effect is likely - On October 24, 2019, the company notified Accor of a material breach of its management agreement for the Sofitel Chicago Magnificent Mile[266](index=266&type=chunk) - Accor filed a complaint on November 7, 2019, seeking a declaratory judgment that no breach occurred; the company's subsidiary, Ashford TRS Chicago II, filed a counter-complaint on January 6, 2020, alleging breach and seeking termination rights[266](index=266&type=chunk) - Management believes the ultimate resolution of current legal proceedings will not have a material adverse effect on consolidated financial position or results of operations, but outcomes are uncertain and could be materially adverse if losses exceed estimates[266](index=266&type=chunk) [Item 4. Mine Safety Disclosures](index=78&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company is not subject to mine safety disclosures - Mine Safety Disclosures are not applicable to the company[266](index=266&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=78&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock trades on NYSE, with 560 holders; 2020 dividend policy is under review due to COVID-19 impact - The company's common stock is listed and traded on the NYSE under the symbol 'BHR'; as of March 10, 2020, there were **560 holders of record**[266](index=266&type=chunk) - Dividends declared per common share were **$0.64** for both 2019 and 2018; the board expects to reconsider its 2020 dividend policy due to the impact of COVID-19, potentially eliminating or significantly reducing it[268](index=268&type=chunk) Characterization of Distributions Per Common Stock (Cash) | Category | 2019 Amount | 2019 % | 2018 Amount | 2018 % | 2017 Amount | 2017 % | |:---|:---|:---|:---|:---|:---|:---| | Ordinary income | $— | —% | $— | —% | $0.1338 (1) | 27.8755% | | Capital gain | $— | — | $— | — | $0.0297 (1) | 6.1817 | | Unrecaptured 1250 gain | $— | — | $— | — | $0.0671 (1) | 13.9757 | | Return of capital | $0.6400 (4) | 100.0000 | $0.6400 (3) | 100.0000 | $0.2494 (1) | 51.9671 | | **Total** | **$0.6400** | **100.0000%** | **$0.6400** | **100.0000%** | **$0.4800** | **100.0000%** | - As of December 31, 2019, **2,423,983 securities** remained available for future issuance under equity compensation plans[273](index=273&type=chunk) - The board approved a **$50 million stock repurchase program** on December 5, 2017; no shares were purchased in 2019 under this authorization, but **15,205 shares** were purchased in Q4 2019 (including **14,559 for tax-withholding**)[273](index=273&type=chunk)[274](index=274&type=chunk) [Item 6. Selected Financial Data](index=83&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected consolidated financial and operating data from 2015-2019, including statements of operations, balance sheets, and key metrics Statements of Operations Data (in thousands, except per share amounts) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | |:---|:---|:---|:---|:---|:---|\ | Total revenue | $487,614 | $431,398 | $414,063 | $405,857 | $349,545 | | Total operating expenses | $448,375 | $381,311 | $375,221 | $358,716 | $303,569 | | Gain (loss) on insurance settlement, disposition of assets and sale of hotel properties | $25,165 | $15,738 | $23,797 | $26,359 | $— | | Operating income | $64,404 | $65,825 | $62,639 | $73,500 | $45,976 | | Net income (loss) | $1,196 | $2,585 | $28,324 | $24,320 | $(4,691) | | Net income (loss) attributable to the Company | $371 | $1,320 | $23,022 | $19,316 | $(6,712) | | Net income (loss) attributable to common stockholders | $(9,771) | $(5,885) | $16,227 | $15,456 | $(8,698) | | Diluted income (loss) per common share | $(0.32) | $(0.19) | $0.51 | $0.55 | $(0.34) | | Weighted average diluted common shares | 32,289 | 31,944 | 34,706 | 31,195 | 25,888 | Balance Sheet Data (in thousands) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | |:---|:---|:---|:---|:---|:---|\ | Investments in hotel properties, gross | $1,791,174 | $1,562,806 | $1,403,110 | $1,258,412 | $1,315,621 | | Accumulated depreciation | $(309,752) | $(262,905) | $(257,268) | $(243,880) | $(224,142) | | Investments in hotel properties, net | $1,481,422 | $1,299,901 | $1,145,842 | $1,014,532 | $1,091,479 | | Cash and cash equivalents | $71,995 | $182,578 | $137,522 | $126,790 | $105,039 | | Restricted cash | $58,388 | $75,910 | $47,820 | $37,855 | $33,135 | | Note receivable | $— | $— | $8,098 | $8,098 | $8,098 | | Total assets | $1,758,947 | $1,636,487 | $1,423,819 | $1,256,997 | $1,352,750 | | Indebtedness, net | $1,058,486 | $985,873 | $820,959 | $764,616 | $835,592 | | Total stockholders' equity of the Company | $369,267 | $397,476 | $381,305 | $308,796 | $338,859 | Other Data (in thousands, except per share amounts) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | |:---|:---|:---|:---|:---|:---|\ | Cash provided by (used in) operating activities | $66,262 | $70,733 | $70,608 | $58,607 | $8,972 | | Cash provided by (used in) investing activities | $(226,425) | $(166,824) | $(173,942) | $103,489 | $(179,347) | | Cash provided by (used in) financing activities | $32,058 | $169,237 | $124,031 | $(135,625) | $107,464 | | Cash dividends declared per common share | $0.64 | $0.64 | $0.64 | $0.46 | $0.35 | | EBITDAre (unaudited) (1) | $102,418 | $96,400 | $96,272 | $86,313 | $77,225 | | Hotel EBITDA (unaudited) (1) | $141,318 | $137,621 | $128,300 | $128,995 | $114,469 | | Funds From Operations (FFO) (unaudited) (1) | $30,788 | $32,057 | $44,897 | $34,050 | $31,859 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=84&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Detailed analysis of financial condition and operations for 2019 and 2018, covering business overview, COVID-19 impact, key performance indicators, and non-GAAP measures [Overview](index=85&type=section&id=Overview) Braemar Hotels & Resorts Inc. is a Maryland REIT investing in luxury hotels, advised by Ashford LLC, with no direct employees - Braemar Hotels & Resorts Inc., a Maryland corporation formed in April 2013, invests primarily in high RevPAR luxury hotels and resorts, operating as a REIT through Braemar OP[285](index=285&type=chunk) - As of March 10, 2020, the company owned interests in **thirteen hotel properties** (**3,722 total rooms**, **3,487 net rooms**) in six states, D.C., and St. Thomas, U.S. Virgin Islands[285](index=285&type=chunk) - Ashford LLC, a subsidiary of Ashford Inc., advises and asset-manages the hotel portfolio; the company has no employees, relying on Ashford LLC for all services[285](index=285&type=chunk) Advisory Agreement Net Earnings (Year Ended December 31, 2019) | Category | Amount (in thousands) | |:---|:---|\ | Revenues | $29,636 | | Expenses | $(11,081) | | **Net Earnings** | **$18,555** | [Recent Developments](index=85&type=section&id=Recent%20Developments) Recent developments include the significant impact of COVID-19, the acquisition of Ritz-Carlton Lake Tahoe, and various financing activities - The COVID-19 pandemic has caused a significant and rapidly accelerating decline in hotel revenue, occupancy, and RevPAR across the portfolio, leading to substantial erosion in hotel cash flow[287](index=287&type=chunk) - On January 15, 2019, the company acquired the Ritz-Carlton, Lake Tahoe for **$120.0 million**, financed with a **$54.0 million mortgage loan** (LIBOR + **2.10%**, five-year term)[289](index=289&type=chunk) - The company entered into the ERFP Agreement with Ashford Inc., where Ashford LLC provides up to **$50 million** (optionally **$100 million**) for property acquisitions in exchange for FF&E, leased back rent-free[289](index=289&type=chunk) - Other key developments in 2019 include refinancing several mortgage loans, investing in OpenKey, distributing Ashford Inc. common stock, and establishing a new **$75.0 million secured revolving credit facility**[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk) [Key Indicators of Operating Performance](index=88&type=section&id=Key%20Indicators%20of%20Operating%20Performance) Occupancy, ADR, and RevPAR are key indicators for hotel performance, alongside non-GAAP measures like FFO and EBITDAre - The company uses Occupancy, ADR (Average Daily Rate), and RevPAR (Revenue Per Available Room) as key indicators to evaluate hotel operating performance[293](index=293&type=chunk) - RevPAR is a leading indicator of core revenues, with improvements driven by occupancy increasing variable operating costs, while improvements driven by ADR have a greater impact on operating margins[293](index=293&type=chunk) - Rooms revenue comprised approximately **62% of total hotel revenue** for the year ended December 31, 2019[293](index=293&type=chunk) - Non-GAAP measures like FFO, AFFO, EBITDAre, and Adjusted EBITDAre are also used to evaluate operating performance and ability to meet financial obligations[293](index=293&type=chunk) [Principal Factors Affecting Our Results of Operations](index=88&type=section&id=Principal%20Factors%20Affecting%20Our%20Results%20of%20Operations) Operating results are influenced by hotel demand, supply, and the ability of management to control revenues and expenses - Operating results are primarily affected by overall demand for hotel rooms relative to supply, and the ability of third-party management companies to increase revenues while controlling expenses[294](index=294&type=chunk) - Demand for lodging correlates directly with the overall economy (e.g., GDP growth), with historical periods of strong demand following declines[294](index=294&type=chunk) - New hotel development (supply) is influenced by construction costs, financing availability, and existing hotel performance; supply growth in certain markets may negatively impact performance[294](index=294&type=chunk) - Revenue is primarily derived from rooms (major driver), food and beverage, and other hotel services (e.g., parking, resort fees)[296](index=296&type=chunk) - Hotel operating expenses include rooms, food and beverage, management fees, and other hotel expenses (e.g., administrative, marketing, utilities); variable expenses fluctuate with occupancy, while ADR changes have a more significant impact on operating margins[296](index=296&type=chunk) [RESULTS OF OPERATIONS](index=90&type=section&id=RESULTS%20OF%20OPERATIONS) Analysis of consolidated statements of operations for 2019 and 2018, detailing changes in revenue, expenses, and net income Consolidated Statements of Operations Summary (in thousands) | Category | 2019 | 2018 | Favorable (Unfavorable) $ Change | % Change | |:---|:---|:---|:---|:---|\ | Total revenue | $487,614 | $431,398 | $56,216 | 13.0% | | Total expenses | $448,375 | $381,311 | $(67,064) | (17.6)% | | Gain (loss) on insurance settlement, disposition of assets and sale of hotel properties | $25,165 | $15,738 | $(9,427) | (59.9)% | | Operating income (loss) | $64,404 | $65,825 | $(1,421) | (2.2)% | | Net income (loss) | $1,196 | $2,585 | $(1,389) | (53.7)% | | Net income (loss) attributable to the Company | $371 | $1,320 | $(949) | (71.9)% | - Net income attributable to the Company decreased by **$949,000** (**71.9%**) from **$1.3 million** in 2018 to **$371,000** in 2019[303](index=303&type=chunk) - Rooms revenue increased by **$21.1 million** (**7.5%**) to **$303.8 million** in 2019, driven by acquisitions (Ritz-Carlton, Sarasota; Ritz-Carlton, Lake Tahoe) and higher room rates at some comparable properties, partially offset by decreased occupancy and property dispositions[303](index=303&type=chunk) - Food and beverage revenue increased by **$20.4 million** (**21.6%**) to **$115.1 million**, primarily due to acquisitions[305](index=305&type=chunk) - Other hotel revenue increased by **$14.7 million** (**27.3%**) to **$68.7 million**, also largely due to acquisitions and business interruption revenue[306](index=306&type=chunk) - Total hotel operating expenses increased by **$51.0 million** (**18.7%**) to **$323.6 million**, mainly due to acquisitions and increased direct and indirect expenses[298](index=298&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) - Advisory services fee increased by **$515,000** (**2.6%**) to **$20.5 million**, reflecting higher base fees and equity-based compensation, partially offset by a lower incentive fee[307](index=307&type=chunk) - Gain on insurance settlement, disposition of assets, and sale of hotel properties was **$25.2 million** in 2019, including **$26.2 million** from Hurricane Irma settlements, partially offset by a **$1.2 million loss** on FF&E disposition[307](index=307&type=chunk) [Indebtedness](index=95&type=section&id=Indebtedness) Details of the company's $1.1 billion gross outstanding indebtedness as of December 31, 2019, including interest rates and maturity dates - As of December 31, 2019, gross outstanding indebtedness was approximately **$1.1 billion**, with a weighted average interest rate of **4.04%**[310](index=310&type=chunk) Indebtedness Summary (December 31, 2019) | Loan/Property(ies) | Number of Assets Encumbered | Outstanding Balance at Dec 31, 2019 | Interest Rate at Dec 31, 2019 | Amortization | Maturity Date (1) | Fully Extended Maturity Date | |:---|:---|:---|:---|:---|:---|:---|\ | JPMorgan (2) Park Hyatt Beaver Creek, Beaver Creek, CO | 1 | $67,500 | 4.51% | Interest only | Apr-2020 | Apr-2022 | | BAML (3) The Notary Hotel, Philadelphia, PA Courtyard San Francisco Downtown, San Francisco, CA Seattle Marriott Waterfront, Seattle, WA Chicago Sofitel Magnificent Mile, Chicago, IL | 4 | $435,000 | 3.92% | Interest only | Jun-2020 | Jun-2025 | | Apollo (4) Ritz-Carlton, St. Thomas, USVI | 1 | $42,500 | 6.71% | Interest only | Aug-2021 | Aug-2024 | | BAML (5) Hotel Yountville, Yountville, CA | 1 | $51,000 | 4.31% | Interest only | May-2022 | May-2022 | | BAML (6) Bardessono Hotel, Yountville, CA | 1 | $40,000 | 4.31% | Interest only | Aug-2022 | Aug-2022 | | BAML (7) Ritz-Carlton, Sarasota, FL | 1 | $100,000 | 4.41% | Interest only | Apr-2023 | Apr-2023 | | BAML (8) Ritz-Carlton, Lake Tahoe, CA | 1 | $54,000 | 3.86% | Interest only | Jan-2024 | Jan-2024 | | Prudential (9) Capital Hilton, Washington, D.C. Hilton La Jolla Torrey Pines, La Jolla, CA | 2 | $195,000 | 3.46% | Interest only | Feb-2024 | Feb-2024 | | BAML (10) Pier House Resort, Key West, FL | 1 | $80,000 | 3.61% | Interest only | Sep-2024 | Sep-2024 | | **Total/Weighted Average** | **13** | **$1,065,000** | **4.04%** | | | | - Several loans include financial cash trap triggers (e.g., **1.20x debt service coverage ratio**, **9.0% debt yield**), which, if triggered, divert hotel profits to lenders, potentially affecting liquidity and REIT distribution ability[312](index=312&type=chunk) - The company refinanced multiple mortgage loans in 2019, including a **$186.8 million loan** with a new **$195.0 million loan** for Capital Hilton and Hilton La Jolla Torrey Pines, and a **$70.0 million loan** with a new **$80.0 million loan** for Pier House Resort[311](index=311&type=chunk)[312](index=312&type=chunk) - A new **$75.0 million secured revolving credit facility** was established on October 25, 2019, replacing the previous one, with a **three-year term** and **two one-year extension options**, and **$25.0 million** was borrowed on March 10, 2020[312](index=312&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=96&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company manages short-term and long-term liquidity through cash from operations, credit facilities, and capital market activities - Short-term liquidity requirements include operating expenses, advisory fees, recurring maintenance, debt interest/principal payments, and common/preferred stock distributions[313](index=313&type=chunk) - Short-term liquidity is met through net cash from operations, existing cash balances, and short-term borrowings from the secured revolving credit facility[313](index=313&type=chunk) - Long-term liquidity needs for acquisitions, redevelopments, and capital expenditures are met through the revolving credit facility, equity/preferred equity issuances, working capital, and debt financings[313](index=313&type=chunk) - The company's ability to fund capital improvements from retained earnings is limited by the REIT distribution requirement (at least **90% of REIT taxable income**)[315](index=315&type=chunk) - The company has a **$75 million senior secured revolving credit facility**, with **$25 million outstanding** as of March 10, 2020, and was in compliance with all financial covenants at December 31, 2019[318](index=318&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) [Sources and Uses of Cash](index=99&type=section&id=Sources%20and%20Uses%20of%20Cash) Analysis of cash flows from operating, investing, and financing activities for 2019, showing changes in cash balances - As of December 31, 2019, cash and cash equivalents were **$72.0 million**, down from **$182.6 million** at December 31, 2018[322](index=322&type=chunk) - Net cash flows from operating activities were **$66.3 million** in 2019, down from **$70.7 million** in 2018, impacted by hotel operations, acquisitions, and dispositions[322](index=322&type=chunk) - Net cash flows used in investing activities were **$226.4 million** in 2019, primarily for the Ritz-Carlton, Lake Tahoe acquisition (**$111.8 million**) and capital improvements (**$136.3 million**)[322](index=322&type=chunk) - Net cash flows provided by financing activities were **$32.1 million** in 2019, including **$329.5 million in borrowings** and **$0.6 million from preferred stock issuance**, offset by **$257.1 million in debt repayments** and **$33.4 million in dividends**[322](index=322&type=chunk) [Inflation](index=100&type=section&id=Inflation) The company's ability to manage inflation depends on hotel performance and managers' capacity to increase room rates and control costs - The company relies on hotel property performance and managers' ability to increase revenues to keep pace with inflation[325](index=325&type=chunk) - Hotel operators can generally increase room rates quickly, but competitive pressures may limit the ability to outpace inflation[325](index=325&type=chunk) - General and administrative costs, property taxes, insurance, and utilities are also subject to inflation[325](index=325&type=chunk) [Off-Balance Sheet Arrangements](index=100&type=section&id=Off-Balance%20Sheet%20Arrangements) The company evaluates partnerships and joint ventures for consolidation but reports no other off-balance sheet arrangements - The company may form or invest in partnerships or joint ventures, evaluating each for consolidation as a variable interest entity (VIE)[326](index=326&type=chunk) - As of the reporting date, the company has no other off-balance sheet arrangements[326](index=326&type=chunk) [Contractual Obligations and Commitments](index=100&type=section&id=Contractual%20Obligations%20and%20Commitments) Summary of contractual obligations including long-term debt, operating leases, and capital commitments as of December 31, 2019 Contractual Obligations and Commitments (December 31, 2019, in thousands) | Obligation | < 1 Year | 1-3 Years | 3-5 Years | > 5 Years | Total | |:---|:---|:---|:---|:---|:---|\ | Long-term debt obligations | $502,500 | $135,000 | $427,500 | $— | $1,065,000 | | (1) Estimated interest obligations | $31,282 | $39,730 | $16,097 | $— | $87,109 | | Operating lease obligations | $3,258 | $6,493 | $6,453 | $148,440 | $164,644 | | Capital commitments | $27,167 | $— | $— | $— | $27,167 | | **Total contractual obligations** | **$564,207** | **$181,223** | **$450,050** | **$148,440** | **$1,343,920** | - The company also has management agreements requiring monthly management fees, incentive fees, and other general fees, expiring between December 2023 and December 2065[327](index=327&type=chunk) - Compliance with financial covenants in loan agreements is critical; violations could require early debt repayment or restrict borrowing; the company was in compliance at December 31, 2019[327](index=327&type=chunk) [Critical Accounting Policies](index=100&type=section&id=Critical%20Accounting%20Policies) Key accounting policies include impairment of hotel investments and income taxes, with a valuation allowance against deferred tax assets - Impairment of Investments in Hotel Properties: Hotels are reviewed for impairment when carrying amounts may not be recoverable, measured by comparing carrying amount to estimated future undiscounted cash flows; an impairment charge is recognized if net book value exceeds estimated fair value[327](index=327&type=chunk) - Income Taxes: The company accounts for income taxes related to its TRSs using the asset and liability method; a valuation allowance of **$11.6 million** was recorded at December 31, 2019, against deferred tax assets due to uncertainty of realization[330](index=330&type=chunk) - Tax positions are evaluated for sustainability upon examination by taxing authorities; tax years 2015-2019 remain subject to potential examination[331](index=331&type=chunk) [Recently Adopted Accounting Standards](index=101&type=section&id=Recently%20Adopted%20Accounting%20Standards) The company adopted ASU 2016-02, Leases (Topic 842), in 2019, recognizing ROU assets and lease liabilities - The company adopted ASU 2016-02, Leases (Topic 842), effective January 1, 2019, on a modified retrospective basis, recognizing ROU assets and lease liabilities for leases longer than **12 months**[333](index=333&type=chunk) - Upon adoption, operating lease liabilities of **$60.6 million** and a corresponding ROU asset of **$82.5 million** (including reclassified intangible assets of **$22.3 million**) were recorded[335](index=335&type=chunk) - The adoption did not materially impact consolidated statements of operations and cash flows[335](index=335&type=chunk) [Recently Issued Accounting Standards](index=102&type=section&id=Recently%20Issued%20Accounting%20Standards) The company is evaluating ASU 2016-13 and ASU 2020-01 regarding financial instruments and equity securities - The company is evaluating ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), effective for fiscal years beginning after December 15, 2019, which replaces the 'incurred loss' method with an 'expected credit loss' impairment model[336](index=336&type=chunk) - ASU 2020-01, Investments – Equity Securities (Topic 321), effective for fiscal years beginning after December 15, 2020, clarifies interactions between accounting for equity securities, equity method investments, and derivative instruments[336](index=336&type=chunk) [Non-GAAP Financial Measures](index=102&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures like EBITDAre, Adjusted EBITDAre, FFO, and AFFO are presented to evaluate operating performance and financial obligations - The company presents non-GAAP measures: EBITDA, EBITDAre, Adjusted EBITDAre, FFO, and AFFO, to evaluate operating performance and provide useful information to investors[337](index=337&type=chunk) - EBITDAre is defined as net income (loss) before interest expense, depreciation, amortization, income taxes, equity in (earnings) loss of unconsolidated entity, impairment charges, and (gain) loss on disposition of hotel properties[337](index=337&type=chunk) - Adjusted EBITDAre further adjusts EBITDAre for items like amortization of favorable/unfavorable contracts, transaction costs, write-off of loan costs, legal/advisory costs, and non-cash items[337](index=337&type=chunk) Reconciliation of Net Income (Loss) to EBITDA, EBITDAre, and Adjusted EBITDAre (in thousands) | Category | 2019 | 2018 | 2017 | |:---|:---|:---|:---|\ | Net income (loss) | $1,196 | $2,585 | $28,324 | | Interest expense and amortization of loan costs | 54,507 | 49,653 | 38,937 | | Depreciation and amortization | 70,112 | 57,383 | 52,262 | | Income tax expense (benefit) | 1,764 | 2,432 | (522) | | Equity in (earnings) loss of unconsolidated entities | 199 | 234 | — | | Company's portion of EBITDA of OpenKey | (195) | (220) | — | | **EBITDA** | **127,583** | **112,067** | **119,001** | | Impairment charges on real estate | — | 71 | 1,068 | | (Gain) loss on insurance settlement, disposition of assets and sale of hotel properties | (25,165) | (15,738) | (23,797) | | **EBITDAre** | **102,418** | **96,400** | **96,272** | | Amortization of favorable (unfavorable) contract assets (liabilities) | 651 | 195 | 180 | | Transaction and conversion costs | 2,076 | 2,965 | 6,774 | | Other (income) expense | 13,947 | 253 | 377 | | Write-off of loan costs and exit fees | 647 | 4,178 | 3,874 | | Unrealized (gain) loss on investment in Ashford Inc. | (7,872) | 8,010 | (9,717) | | Unrealized (gain) loss on derivatives | 1,103 | 82 | 2,056 | | Non-cash stock/unit-based compensation | 7,943 | 7,004 | (1,327) | | Legal, advisory and settlement costs | 527 | (241) | 3,711 | | Contract modification cost | — | — | 5,000 | | Software implementation costs | — | — | 79 | | Uninsured hurricane and wildfire related costs | — | 412 | 3,821 | | Company's portion of adjustments to EBITDAre of OpenKey | 25 | 7 | — | | **Adjusted EBITDAre** | **$121,465** | **$119,265** | **$111,100** | Reconciliation of Net Income (Loss) to FFO and Adjusted FFO (in thousands) | Category | 2019 | 2018 | 2017 | |:---|:---|:---|:---|\ | Net income (loss) | $1,196 | $2,585 | $28,324 | | Income from consolidated entities attributable to noncontrolling interest | (2,032) | (2,016) | (3,264) | | Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership | 1,207 | 751 | (2,038) | | Preferred dividends | (10,142) | (7,205) | (6,795) | | Net income (loss) attributable to common stockholders (1) | (9,771) | (5,885) | 16,227 | | Depreciation and amortization on real estate | 66,933 | 54,350 | 49,361 | | Impairment charges on real estate | — | 71 | 1,068 | | Net income (loss) attributable to redeemable noncontrolling interests in operating partnership | (1,207) | (751) | 2,038 | | Equity in (earnings) loss of unconsolidated entity | 199 | 234 | — | | (Gain) loss on insurance settlement, disposition of assets and sale of hotel properties | (25,165) | (15,738) | (23,797) | | Company's portion of FFO of OpenKey | (201) | (224) | — | | **FFO available to common stockholders and OP unitholders** | **30,788** | **32,057** | **44,897** | | Series B Cumulative Convertible Preferred Stock dividends | 6,842 | 6,829 | 6,795 | | Transaction and conversion costs | 2,076 | 2,965 | 6,774 | | Other (income) expense | 13,947 | 253 | 377 | | Interest expense accretion on refundable membership club benefits | 864 | 676 | — | | Write-off of loan costs and exit fees | 647 | 4,178 | 3,874 | | Amortization of loan costs (1) | 4,263 | 4,164 | 4,804 | | Unrealized (gain) loss on investment in Ashford Inc. | (7,872) | 8,010 | (9,717) | | Unrealized (gain) loss on derivatives (1) | 1,103 | 82 | 2,053 | | Non-cash stock/unit-based compensation | 7,943 | 7,004 | (1,327) | | Legal, advisory and settlement costs | 527 | (241) | 3,711 | | Contract modification cost | — | — | 5,000 | | Software implementation costs | — | — | 79 | | Uninsured hurricane and wildfire related costs | — | 412 | 3,821 | | Tax reform (1) | — | — | (161) | | Company's portion of adjustments to FFO of OpenKey | 28 | 7 | — | | **AFFO available to common stockholders and OP unitholders** | **$61,156** | **$66,396** | **$70,980** | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=108&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate exposure on $1.1 billion variable-rate debt, managed with derivatives like caps and floors - The primary market risk exposure is to changes in interest rates on variable-rate debt; as of December 31, 2019, all **$1.1 billion of gross indebtedness** was variable-rate[357](index=357&type=chunk) - A **25-basis point change** in interest rates on variable-rate debt would impact annual results of operations by approximately **$2.7 million**[357](index=357&type=chunk) - The company uses credit default swaps (notional amount **$50.0 million**, estimated total exposure **$1.2 million**) tied to the CMBX index to hedge financial and capital market risk[359](index=359&type=chunk) - Interest rate floors with notional amounts totaling **$5.0 billion** and strike rates from **-0.25% to 1.63%** are held, with total exposure capped at an initial cost of **$3.6 million**[360](index=360&type=chunk) - Changes in LIBOR reporting practices or the use of alternative reference rates (like SOFR) could adversely affect financing costs[187](index=187&type=chunk)[188](index=188&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=109&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited consolidated financial statements for 2017-2019, including balance sheets, statements of operations, and notes, with an unqualified audit opinion - The consolidated financial statements for the years ended December 31, 2019, 2018, and 2017 are presented, including balance sheets, statements of operations, comprehensive income (loss), equity, and cash flows[362](index=362&type=chunk) - BDO USA, LLP, the independent registered public accounting firm, expressed an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2019[364](index=364&type=chunk)[365](index=365&type=chunk) - The company adopted ASU No. 2016-02, Leases (Topic 842), in 2019, changing its method of accounting for leases[366](index=366&type=chunk) [Report of Independent Registered Public Accounting Firms](index=111&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firms) BDO USA, LLP issued an unqualified opinion on the financial statements and internal controls for 2019 - BDO USA, LLP audited the consolidated financial statements for the period ended December 31, 2019, and expressed an unqualified opinion, stating they present fairly the financial position and results of operations in conformity with GAAP[364](index=364&type=chunk) - The firm also audited the company's internal control over financial reporting as of December 31, 2019, based on COSO criteria, and expressed an unqualified opinion on its effectiveness[365](index=365&type=chunk) - The company changed its method of accounting for leases in 2019 due to the adoption of ASU No. 2016-02, Leases, using the modified retrospective method[366](index=366&type=chunk) [Consolidated Balance Sheets — December 31, 2019 and 2018](index=112&type=section&id=Consolidated%20Balance%20Sheets%20%E2%80%94%20December%2031%2C%202019%20and%202018) Consolidated balance sheets for 2019 and 2018, detailing assets, liabilities, and equity Consolidated Balance Sheets (in thousands) | Asset/Liability | December 31, 2019 | December 31, 2018 | |:---|:---|:---|\ | **ASSETS** | | | | Investments in hotel properties, net | $1,481,422 | $1,299,901 | | Cash and cash equivalents | $71,995 | $182,578 | | Restricted cash | $58,388 | $75,910 | | Operating lease right-of-use assets | $82,596 | $— | | Total assets | $1,758,947 | $1,636,487 | | **LIABILITIES AND EQUITY** | | | | Indebtedness, net | $1,058,486 | $985,873 | | Accounts payable and accrued expenses | $94,919 | $64,116 | | Operating lease liabilities | $61,118 | $— | | Total liabilities | $1,247,203 | $1,093,394 | | Total stockholders' equity of the Company | $369,267 | $397,476 | | Total liabilities and equity | $1,758,947 | $1,636,487 | [Consolidated Statements of Operations — Years Ended December 31, 2019, 2018 and 2017](index=113&type=section&id=Consolidated%20Statements%20of%20Operations%20%E2%80%94%20Years%20Ended%20December%2031%2C%202019%2C%202018%20and%202017) Consolidated statements of operations for 2017-2019, showing revenue, expe

Braemar Hotels & Resorts, Inc. (NYSE:BHR) Q4 2019 Earnings Conference Call February 27, 2020 11:00 AM ET Company Participants Jordan Jennings - IR Richard Stockton - President & CEO Deric Eubanks - CFO Jeremy Welter - COO Conference Call Participants Tyler Batory - Janney Capital Markets Bryan Maher - B. Riley FBR Michael Bellisario - Baird Operator Greetings. Welcome to Braemar Hotels & Resorts Fourth Quarter 2019 Results Conference Call. [Operator Instructions] Please note this conference is being recorde ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission file number: 001-35972 BRAEMAR HOTELS & RESORTS INC. (Exact name of registrant as specified in its charter) (State or ...