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Redeemable Noncontrolling Interests in Operating Partnership

12 Months Ended

Dec. 31, 2021

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interests in Operating Partnership

Redeemable Noncontrolling Interests in Operating Partnership

Redeemable noncontrolling interests in the operating partnership represents the limited partners’ proportionate share of equity in earnings/losses of the operating partnership, which is an allocation of net income/loss attributable to the common unit holders based on the weighted average ownership percentage of these limited partners’ common units of limited partnership interest in the operating partnership (the “common units”) and the units issued under our Long-Term Incentive Plan (the “LTIP units”) that are vested. Each common unit may be redeemed for either cash or, at our sole discretion, up to one share of our REIT common stock, which is either: (i) issued pursuant to an effective registration statement; (ii) included in an effective registration statement providing for the resale of such common stock; or (iii) issued subject to a registration rights agreement.

LTIP units, which are issued to certain executives and employees of Ashford LLC as compensation, generally have vesting periods ranging from three years to five years. Additionally, certain independent members of the board of directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant. Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election, settled in our common stock. An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of the operating partnership at a time when our stock is trading at a level in excess of the price it was trading on the date of the LTIP issuance. More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of the operating partnership or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for the operating partnership.

The compensation committee of the board of directors of the Company may authorize the issuance of Performance LTIP units to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of Performance LTIP units that will be settled in common units of Ashford Trust OP, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period.

With respect to the 2019 and 2020 award agreements, the number of Performance LTIP units actually earned may range from 0% to 200% of target based on achievement of specified absolute and relative total stockholder returns based on the formulas determined by the Company’s compensation committee on the grant date. The performance criteria for the Performance LTIP units are based on market conditions under the relevant literatures. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.

During the year ended December 31, 2021, approximately 8,000 performance-based LTIP units granted in 2018 and 2019, were canceled due to the market condition criteria not being met. As a result there was a claw back of the previously declared dividends in the amount of $518,000.

With respect to the 2021 award agreements, the criteria for the Performance LTIP units are based on performance conditions and market conditions under the relevant literature. The corresponding compensation cost is recognized, based on the grant date fair value of the award, ratably over the service period for the award as the service is rendered, which may vary from period to period, as the number of performance grants earned may vary based on the estimated probable achievement of certain performance targets (performance conditions). The number of Performance LTIP Units to be earned based on the applicable performance conditions is determined upon the final vesting date. The initial calculation of the Performance LTIP units earned can range from 0% to 200% of target, which is further subjected to a specified absolute total stockholder return modifier (market condition) based on the formulas determined by the Company’s compensation committee on the grant date. This will result in an adjustment (75% to 125%) of the initial calculation of the number of performance awards earned based on the applicable performance targets resulting in a final award calculation ranging from 0% to 250% of the target amount.

As of December 31, 2021, there were approximately 127,000 Performance LTIP units outstanding, representing 200% of the target number granted for the 2020 grants and 250% for the 2021 grants.

As of December 31, 2021, we have issued a total of approximately 320,000 LTIP and Performance LTIP units, net of Performance LTIP cancellations. All LTIP and Performance LTIP units other than approximately 17,000 units (5,000 of which are Performance LTIP units) have reached full economic parity with, and are convertible into, common units upon vesting.

We recorded compensation expense for Performance LTIP units and LTIP units as presented in the table below (in thousands):

												Year Ended December 31,
Type						Line Item						2021						2020						2019
Performance LTIP units						Advisory services fee						$	1,128					$	1,972					$	3,594
LTIP units						Advisory services fee						1,119						2,042						3,264
LTIP units						Corporate, general and administrative						22						—						—
LTIP units - independent directors						Corporate, general and administrative						397						816						446
												$	2,666					$	4,830					$	7,304

The unamortized cost of the unvested Performance LTIP units, which was $1.6 million at December 31, 2021, will be expensed over a period of 2.0 years with a weighted average period of 1.9 years. The unamortized cost of the unvested LTIP units, which was $1.3 million at December 31, 2021, will be expensed over a period of 2.2 years with a weighted average period of 2.1 years.

The following table presents the common units redeemed and the fair value upon redemption (in thousands):

												Year Ended December 31,
																		2021						2020						2019
Common units converted to stock																		1						20						—
Fair value of common units converted																		$	43					$	959					$	—

The following table presents the redeemable noncontrolling interest in Ashford Trust and the corresponding approximate ownership percentage:

			December 31, 2021						December 31, 2020
Redeemable noncontrolling interests (in thousands)			$	22,742					$	22,951
Cumulative adjustments to redeemable noncontrolling interests (1) (in thousands)			186,756						186,763
Ownership percentage of operating partnership			0.63		%				8.51		%

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(1)    Reflects the excess of the redemption value over the accumulated historical costs.

We allocated net (income) loss to the redeemable noncontrolling interests and declared aggregate cash distributions to holders of common units and holders of LTIP units, as presented in the table below (in thousands):

									Year Ended December 31,
															2021						2020						2019
Allocated net (income) loss to the redeemable noncontrolling interests															$	3,970					$	89,008					$	28,932
Distributions declared to holders of common units, LTIP units and Performance LTIP units															—						—						6,572
Performance LTIP dividend claw back upon cancellation															(518)						(1,401)						—

A summary of the activity of the units in our operating partnership is as follow (in thousands):

			Year Ended December 31,
			2021						2020						2019
Outstanding at beginning of year			217						219						199
LTIP units issued			70						23						3
Performance LTIP units issued			122						5						2
Performance LTIP units canceled			(8)						(11)						—
Common units issued for hotel acquisition			—						—						15
Common units converted to common stock			(1)						(19)						—
Outstanding at end of year			400						217						219
Common units convertible/redeemable at end of year			207						178						186

X

- Definition

The entire disclosure for noncontrolling interest in consolidated subsidiaries, which could include the name of the subsidiary, the ownership percentage held by the parent, the ownership percentage held by the noncontrolling owners, the amount of the noncontrolling interest, the location of this amount on the balance sheet (when not reported separately), an explanation of the increase or decrease in the amount of the noncontrolling interest, the noncontrolling interest share of the net Income or Loss of the subsidiary, the location of this amount on the income statement (when not reported separately), the nature of the noncontrolling interest such as background information and terms, the amount of the noncontrolling interest represented by preferred stock, a description of the preferred stock, and the dividend requirements of the preferred stock.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-URI http://asc.fasb.org/topic&trid=2197479

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- References

No definition available.

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