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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 September 30, 2023
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: 001-31775
ASHFORD HOSPITALITY TRUST, INC.
(Exact name of registrant as specified in its charter)

Maryland |  | 86-1062192
(State or other jurisdiction of incorporation or organization) |  | (IRS employer identification number)
14185 Dallas Parkway |  |
Suite 1200 |  |
Dallas |  |
Texas |  | 75254
(Address of principal executive offices) |  | (Zip code)

(972) 490-9600
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ | Accelerated filer | ☑
Non-accelerated filer | ☐ | Smaller reporting company | ☑
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock |  | AHT |  | New York Stock Exchange
Preferred Stock, Series D |  | AHT-PD |  | New York Stock Exchange
Preferred Stock, Series F |  | AHT-PF |  | New York Stock Exchange
Preferred Stock, Series G |  | AHT-PG |  | New York Stock Exchange
Preferred Stock, Series H |  | AHT-PH |  | New York Stock Exchange
Preferred Stock, Series I |  | AHT-PI |  | New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value per share |  | 34,513,386
(Class) |  | Outstanding at November 6, 2023

ASHFORD HOSPITALITY TRUST, INC.
FORM 10-Q
FOR THE QUARTER ENDED September 30, 2023
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS (unaudited) |
Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 | 2
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 | 3
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022 | 4
Consolidated Statements of Equity (Deficit) for the Three and Nine Months Ended September 30, 2023 and 2022 | 5
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 | 8
Notes to Consolidated Financial Statements | 10
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 40
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 58
ITEM 4. CONTROLS AND PROCEDURES | 58
PART II. OTHER INFORMATION |
ITEM 1. LEGAL PROCEEDINGS | 58
ITEM 1A. RISK FACTORS | 59
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 59
ITEM 3. DEFAULTS UPON SENIOR SECURITIES | 59
ITEM 4. MINE SAFETY DISCLOSURES | 60
ITEM 5. OTHER INFORMATION | 60
ITEM 6. EXHIBITS | 60
SIGNATURES | 62

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share amounts)

| September 30, 2023 |  | December 31, 2022 |
ASSETS |  |  |  |
Investments in hotel properties, net ($76,017 and $0 attributable to VIEs). | $ | 3,122,833 |  |  | $ | 3,118,331 |  |
Cash and cash equivalents | 184,181 |  |  | 417,064 |  |
Restricted cash ($14,279 and $0 attributable to VIEs) | 171,896 |  |  | 141,962 |  |
Accounts receivable, net of allowance of $1,471 and $501, respectively | 73,712 |  |  | 49,809 |  |
Inventories | 3,945 |  |  | 3,856 |  |
Notes receivable, net | 5,934 |  |  | 5,062 |  |
Investments in unconsolidated entities | 10,379 |  |  | 19,576 |  |
Deferred costs, net ($93 and $0 attributable to VIEs) | 1,858 |  |  | 2,665 |  |
Prepaid expenses ($669 and $0 attributable to VIEs) | 15,800 |  |  | 15,981 |  |
Derivative assets | 25,493 |  |  | 47,182 |  |
Operating lease right-of-use assets | 44,136 |  |  | 43,921 |  |
Other assets | 18,171 |  |  | 21,653 |  |
Intangible assets | 797 |  |  | 797 |  |
Due from Ashford Inc., net | — |  |  | 486 |  |
Due from related parties, net | 4,347 |  |  | 6,570 |  |
Due from third-party hotel managers | 24,145 |  |  | 22,462 |  |
Assets held for sale | 10,882 |  |  | — |  |
Total assets | $ | 3,718,509 |  |  | $ | 3,917,377 |  |
LIABILITIES AND EQUITY/DEFICIT |  |  |  |
Liabilities: |  |  |  |
Indebtedness, net ($38,730 and $0 attributable to VIEs) | $ | 3,631,719 |  |  | $ | 3,838,543 |  |
Finance lease liability | 18,465 |  |  | 18,847 |  |
Other finance liability ($26,804 and $0 attributable to VIEs) | 26,804 |  |  | — |  |
Accounts payable and accrued expenses ($11,194 and $0 attributable to VIEs) | 153,209 |  |  | 115,970 |  |
Accrued interest payable ($99 and $0 attributable to VIEs) | 25,243 |  |  | 15,287 |  |
Dividends and distributions payable | 3,568 |  |  | 3,118 |  |
Due to Ashford Inc., net | 9,028 |  |  | — |  |
Due to third-party hotel managers | 1,134 |  |  | 1,319 |  |
Intangible liabilities, net | 2,037 |  |  | 2,097 |  |
Operating lease liabilities | 44,887 |  |  | 44,661 |  |
Other liabilities | 3,948 |  |  | 4,326 |  |
Liabilities related to assets held for sale | 9,795 |  |  | — |  |
Total liabilities | 3,929,837 |  |  | 4,044,168 |  |
Commitments and contingencies (note 17) |  |  |  |
Redeemable noncontrolling interests in operating partnership | 22,394 |  |  | 21,550 |  |
Series J Redeemable Preferred Stock, $0.01 par value, 2,628,792 and 87,115 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 60,482 |  |  | 2,004 |  |
Series K Redeemable Preferred Stock, $0.01 par value, 154,233 and 1,800 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 3,798 |  |  | 44 |  |
Equity (deficit): |  |  |  |
Preferred stock, $0.01 par value, 50,000,000 shares authorized: |  |  |  |
Series D Cumulative Preferred Stock, 1,174,427 shares issued and outstanding at September 30, 2023 and December 31, 2022 | 12 |  |  | 12 |  |
Series F Cumulative Preferred Stock, 1,251,044 shares issued and outstanding at September 30, 2023 and December 31, 2022 | 12 |  |  | 12 |  |
Series G Cumulative Preferred Stock, 1,531,996 shares issued and outstanding at September 30, 2023 and December 31, 2022 | 15 |  |  | 15 |  |
Series H Cumulative Preferred Stock, 1,308,415 shares issued and outstanding at September 30, 2023 and December 31, 2022 | 13 |  |  | 13 |  |
Series I Cumulative Preferred Stock, 1,252,923 shares issued and outstanding at September 30, 2023 and December 31, 2022 | 13 |  |  | 13 |  |
Common stock, $0.01 par value, 400,000,000 shares authorized, 34,513,386 and 34,495,185 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 345 |  |  | 345 |  |
Additional paid-in capital | 2,385,679 |  |  | 2,383,244 |  |
Accumulated deficit | (2,697,244) |  |  | (2,534,043) |  |
Total stockholders’ equity (deficit) of the Company | (311,155) |  |  | (150,389) |  |
Noncontrolling interest in consolidated entities | 13,153 |  |  | — |  |
Total equity (deficit) | (298,002) |  |  | (150,389) |  |
Total liabilities and equity/deficit | $ | 3,718,509 |  |  | $ | 3,917,377 |  |

See Notes to Consolidated Financial Statements.
2

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |
REVENUE |  |  |  |  |  |  |  |  |
Rooms | $ | 270,607 |  |  | $ | 260,616 |  |  | $ | 817,477 |  |  | $ | 731,474 |  |  |
Food and beverage | 52,205 |  |  | 48,633 |  |  | 172,943 |  |  | 139,709 |  |  |
Other hotel revenue | 19,537 |  |  | 18,183 |  |  | 55,135 |  |  | 50,042 |  |  |
Total hotel revenue | 342,349 |  |  | 327,432 |  |  | 1,045,555 |  |  | 921,225 |  |  |
Other | 665 |  |  | 724 |  |  | 2,094 |  |  | 2,164 |  |  |
Total revenue | 343,014 |  |  | 328,156 |  |  | 1,047,649 |  |  | 923,389 |  |  |
EXPENSES |  |  |  |  |  |  |  |  |
Hotel operating expenses: |  |  |  |  |  |  |  |  |
Rooms | 64,803 |  |  | 61,464 |  |  | 190,041 |  |  | 169,250 |  |  |
Food and beverage | 39,511 |  |  | 36,199 |  |  | 121,211 |  |  | 100,981 |  |  |
Other expenses | 115,625 |  |  | 106,907 |  |  | 348,463 |  |  | 310,407 |  |  |
Management fees | 12,687 |  |  | 11,686 |  |  | 38,706 |  |  | 33,552 |  |  |
Total hotel expenses | 232,626 |  |  | 216,256 |  |  | 698,421 |  |  | 614,190 |  |  |
Property taxes, insurance and other | 17,345 |  |  | 17,541 |  |  | 52,880 |  |  | 51,289 |  |  |
Depreciation and amortization | 45,954 |  |  | 49,428 |  |  | 140,963 |  |  | 152,444 |  |  |
Advisory services fee | 12,395 |  |  | 12,513 |  |  | 37,650 |  |  | 38,176 |  |  |
Corporate, general and administrative | 3,871 |  |  | (884) |  |  | 11,387 |  |  | 6,730 |  |  |
Total operating expenses | 312,191 |  |  | 294,854 |  |  | 941,301 |  |  | 862,829 |  |  |
Gain (loss) on consolidation of VIE and disposition of assets | 6,390 |  |  | (11) |  |  | 7,443 |  |  | 273 |  |  |
OPERATING INCOME (LOSS) | 37,213 |  |  | 33,291 |  |  | 113,791 |  |  | 60,833 |  |  |
Equity in earnings (loss) of unconsolidated entities | (138) |  |  | (147) |  |  | (715) |  |  | (451) |  |  |
Interest income | 1,888 |  |  | 1,576 |  |  | 6,755 |  |  | 2,153 |  |  |
Other income (expense) | 34 |  |  | 241 |  |  | 277 |  |  | 426 |  |  |
Interest expense and amortization of discounts and loan costs | (99,380) |  |  | (61,023) |  |  | (270,485) |  |  | (152,975) |  |  |
Write-off of premiums, loan costs and exit fees | (1,263) |  |  | (1,378) |  |  | (2,633) |  |  | (3,076) |  |  |
Realized and unrealized gain (loss) on derivatives | (2,678) |  |  | 9,774 |  |  | 4,490 |  |  | 19,059 |  |  |
INCOME (LOSS) BEFORE INCOME TAXES | (64,324) |  |  | (17,666) |  |  | (148,520) |  |  | (74,031) |  |  |
Income tax (expense) benefit | (127) |  |  | (4,657) |  |  | (2,410) |  |  | (10,340) |  |  |
NET INCOME (LOSS) | (64,451) |  |  | (22,323) |  |  | (150,930) |  |  | (84,371) |  |  |
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership | 889 |  |  | 231 |  |  | 1,838 |  |  | 679 |  |  |
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY | (63,562) |  |  | (22,092) |  |  | (149,092) |  |  | (83,692) |  |  |
Preferred dividends | (4,295) |  |  | (3,104) |  |  | (11,290) |  |  | (9,311) |  |  |
Deemed dividends on redeemable preferred stock | (760) |  |  | — |  |  | (1,993) |  |  | — |  |  |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (68,617) |  |  | $ | (25,196) |  |  | $ | (162,375) |  |  | $ | (93,003) |  |  |
INCOME (LOSS) PER SHARE - BASIC AND DILUTED |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |
Net income (loss) attributable to common stockholders | $ | (1.99) |  |  | $ | (0.73) |  |  | $ | (4.72) |  |  | $ | (2.71) |  |  |
Weighted average common shares outstanding – basic | 34,459 |  |  | 34,371 |  |  | 34,395 |  |  | 34,324 |  |  |
Diluted: |  |  |  |  |  |  |  |  |
Net income (loss) attributable to common stockholders | $ | (1.99) |  |  | $ | (0.73) |  |  | $ | (4.72) |  |  | $ | (2.71) |  |  |
Weighted average common shares outstanding – diluted | 34,459 |  |  | 34,371 |  |  | 34,395 |  |  | 34,324 |  |  |

See Notes to Consolidated Financial Statements.
3

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Net income (loss) | $ | (64,451) |  |  | $ | (22,323) |  |  | $ | (150,930) |  |  | $ | (84,371) |  |  |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |  |  |
Total other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | — |  |  |
Comprehensive income (loss) | (64,451) |  |  | (22,323) |  |  | (150,930) |  |  | (84,371) |  |  |
Less: Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership | 889 |  |  | 231 |  |  | 1,838 |  |  | 679 |  |  |
Comprehensive income (loss) attributable to the Company | $ | (63,562) |  |  | $ | (22,092) |  |  | $ | (149,092) |  |  | $ | (83,692) |  |  |

See Notes to Consolidated Financial Statements.
4

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
(unaudited, in thousands except per share amounts)

|  |  |  |  | Preferred Stock |  |  |  | Additional Paid-in Capital |  | Accumulated Deficit |  |  |  | Noncontrolling Interest in Consolidated Entities |  | Total |  |  |  |  |  |  |  |  |  |
|  |  | Series D |  | Series F |  | Series G |  | Series H |  | Series I |  | Common Stock |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at June 30, 2023 |  |  |  |  | 1,174 |  |  | $ | 12 |  |  | 1,251 |  |  | $ | 12 |  |  | 1,532 |  |  | $ | 15 |  |  | 1,308 |  |  | $ | 13 |  |  | 1,253 |  |  | $ | 13 |  |  | 34,493 |  |  | $ | 345 |  |  | $ | 2,384,805 |  |  | $ | (2,628,370) |  |  |  |  | $ | 7,961 |  |  | $ | (235,194) |  |  |  |  |  |  |  |  |  |  |
Equity-based compensation |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 874 |  |  | — |  |  |  |  | — |  |  | 874 |  |  |  |  |  |  |  |  |  |  |
Issuance of restricted shares/units |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 20 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  |  |  |  |  |  |  |  |
Issuance of preferred stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  |  |  |  |  |  |  |  |
Dividends declared – preferred stock – Series D ($0.53/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (621) |  |  |  |  | — |  |  | (621) |  |  |  |  |  |  |  |  |  |  |
Dividends declared – preferred stock – Series F ($0.46/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (577) |  |  |  |  | — |  |  | (577) |  |  |  |  |  |  |  |  |  |  |
Dividends declared – preferred stock – Series G ($0.46/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (706) |  |  |  |  | — |  |  | (706) |  |  |  |  |  |  |  |  |  |  |
Dividends declared – preferred stock – Series H ($0.47/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (613) |  |  |  |  | — |  |  | (613) |  |  |  |  |  |  |  |  |  |  |
Dividends declared – preferred stock – Series I ($0.47/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (587) |  |  |  |  | — |  |  | (587) |  |  |  |  |  |  |  |  |  |  |
Dividends declared – preferred stock – Series J ($0.50/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,130) |  |  |  |  | — |  |  | (1,130) |  |  |  |  |  |  |  |  |  |  |
Dividends declared – preferred stock – Series K ($0.51/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (61) |  |  |  |  | — |  |  | (61) |  |  |  |  |  |  |  |  |  |  |
Redemption value adjustment |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (257) |  |  |  |  | — |  |  | (257) |  |  |  |  |  |  |  |  |  |  |
Redemption value adjustment – preferred stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (760) |  |  |  |  | — |  |  | (760) |  |  |  |  |  |  |  |  |  |  |
Redemption of preferred stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  |  |  |  |  |  |  |  |
Contributions from noncontrolling interest in consolidated entities |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 5,192 |  |  | 5,192 |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (63,562) |  |  |  |  | — |  |  | (63,562) |  |  |  |  |  |  |  |  |  |  |
Balance at September 30, 2023 |  |  |  |  | 1,174 |  |  | $ | 12 |  |  | 1,251 |  |  | $ | 12 |  |  | 1,532 |  |  | $ | 15 |  |  | 1,308 |  |  | $ | 13 |  |  | 1,253 |  |  | $ | 13 |  |  | 34,513 |  |  | $ | 345 |  |  | $ | 2,385,679 |  |  | $ | (2,697,244) |  |  |  |  | $ | 13,153 |  |  | $ | (298,002) |  |  |  |  |  |  |  |  |  |  |

|  | Preferred Stock |  | Redeemable Noncontrolling Interests in Operating Partnership
|  |  | Series J |  | Series K |
|  |  |  |  | Shares |  | Amount |  | Shares |  | Amount |
Balance at June 30, 2023 |  |  |  |  | 1,575 |  |  | $ | 36,224 |  |  | 72 |  |  | $ | 1,766 |  |  | $ | 22,409 |
Equity-based compensation |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 617 |
Issuance of restricted shares/units |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuance of preferred stock |  |  |  |  | 1,055 |  |  | 23,567 |  |  | 82 |  |  | 1,985 |  |  | — |
Dividends declared – preferred stock – Series D ($0.53/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series F ($0.46/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series G ($0.46/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series H ($0.47/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series I ($0.47/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series J ($0.50/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series K ($0.51/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Redemption value adjustment |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 257 |
Redemption value adjustment – preferred stock |  |  |  |  | — |  |  | 713 |  |  | — |  |  | 47 |  |  | — |
Redemption of preferred stock |  |  |  |  | (1) |  |  | (22) |  |  | — |  |  | — |  |  | — |
Contributions from noncontrolling interest in consolidated entities |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net income (loss) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (889) |
Balance at September 30, 2023 |  |  |  |  | 2,629 |  |  | $ | 60,482 |  |  | 154 |  |  | $ | 3,798 |  |  | $ | 22,394 |

5

|  |  |  |  | Preferred Stock |  |  |  | Additional Paid-in Capital |  | Accumulated Deficit |  |  |  | Noncontrolling Interest in Consolidated Entities |  | Total
|  |  | Series D |  | Series F |  | Series G |  | Series H |  | Series I |  | Common Stock |  |  |  |  |
|  |  |  |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |
Balance at December 31, 2022 |  |  |  |  | 1,174 |  |  | $ | 12 |  |  | 1,251 |  |  | $ | 12 |  |  | 1,532 |  |  | $ | 15 |  |  | 1,308 |  |  | $ | 13 |  |  | 1,253 |  |  | $ | 13 |  |  | 34,495 |  |  | $ | 345 |  |  | $ | 2,383,244 |  |  | $ | (2,534,043) |  |  |  |  | $ | — |  |  | $ | (150,389) |
Purchases of common stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (24) |  |  | — |  |  | (83) |  |  | — |  |  |  |  | — |  |  | (83) |
Equity-based compensation |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,518 |  |  | — |  |  |  |  | — |  |  | 2,518 |
Issuance of restricted shares/units |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 42 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Issuance of preferred stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Dividends declared – preferred stock – Series D ($1.59/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,861) |  |  |  |  | — |  |  | (1,861) |
Dividends declared – preferred stock – Series F ($1.38/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,730) |  |  |  |  | — |  |  | (1,730) |
Dividends declared – preferred stock – Series G ($1.38/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,118) |  |  |  |  | — |  |  | (2,118) |
Dividends declared – preferred stock – Series H ($1.41/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,840) |  |  |  |  | — |  |  | (1,840) |
Dividends declared – preferred stock – Series I ($1.41/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,762) |  |  |  |  | — |  |  | (1,762) |
Dividends declared – preferred stock – Series J ($1.50/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,881) |  |  |  |  | — |  |  | (1,881) |
Dividends declared – preferred stock – Series K ($1.54/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (98) |  |  |  |  | — |  |  | (98) |
Redemption value adjustment |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (826) |  |  |  |  | — |  |  | (826) |
Redemption value adjustment – preferred stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,993) |  |  |  |  | — |  |  | (1,993) |
Redemption of preferred stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Noncontrolling interest in consolidated entities recognized upon consolidation of VIE |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 7,961 |  |  | 7,961 |
Contributions from noncontrolling interest in consolidated entities |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 5,192 |  |  | 5,192 |
Net income (loss) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (149,092) |  |  |  |  | — |  |  | (149,092) |
Balance at September 30, 2023 |  |  |  |  | 1,174 |  |  | $ | 12 |  |  | 1,251 |  |  | $ | 12 |  |  | 1,532 |  |  | $ | 15 |  |  | 1,308 |  |  | $ | 13 |  |  | 1,253 |  |  | $ | 13 |  |  | 34,513 |  |  | $ | 345 |  |  | $ | 2,385,679 |  |  | $ | (2,697,244) |  |  |  |  | $ | 13,153 |  |  | $ | (298,002) |

| Preferred Stock |  | Redeemable Noncontrolling Interests in Operating Partnership
| Series J |  | Series K |
| Shares |  | Amount |  | Shares |  | Amount |
Balance at December 31, 2022 | 87 |  |  | $ | 2,004 |  |  | 2 |  |  | $ | 44 |  |  | $ | 21,550 |
Purchases of common stock | — |  |  | — |  |  | — |  |  | — |  |  | — |
Equity-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 1,856 |
Issuance of restricted shares/units | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuance of preferred stock | 2,545 |  |  | 56,658 |  |  | 152 |  |  | 3,656 |  |  | — |
Dividends declared – preferred stock – Series D ($1.59/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series F ($1.38/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series G ($1.38/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series H ($1.41/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series I ($1.41/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series J ($1.50/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock – Series K ($1.54/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |
Redemption value adjustment | — |  |  | — |  |  | — |  |  | — |  |  | 826 |
Redemption value adjustment – preferred stock | — |  |  | 1,895 |  |  | — |  |  | 98 |  |  | — |
Redemption of preferred stock | (3) |  |  | (75) |  |  | — |  |  | — |  |  | — |
Noncontrolling interest in consolidated entities recognized upon consolidation of VIE | — |  |  | — |  |  | — |  |  | — |  |  | — |
Contributions from noncontrolling interest in consolidated entities | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | (1,838) |
Balance at September 30, 2023 | 2,629 |  |  | $ | 60,482 |  |  | 154 |  |  | $ | 3,798 |  |  | $ | 22,394 |

6

|  |  |  |  | Preferred Stock |  |  |  | Additional Paid-in Capital |  | Accumulated Deficit |  |  |  | Total |  | Redeemable Noncontrolling Interests in Operating Partnership |  |
|  |  | Series D |  | Series F |  | Series G |  | Series H |  | Series I |  | Common Stock |  |  |  |  |  |
|  |  |  |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |  |
Balance at June 30, 2022 |  |  |  |  | 1,174 |  |  | $ | 12 |  |  | 1,251 |  |  | $ | 12 |  |  | 1,532 |  |  | $ | 15 |  |  | 1,308 |  |  | $ | 13 |  |  | 1,253 |  |  | $ | 13 |  |  | 34,487 |  |  | $ | 345 |  |  | $ | 2,382,197 |  |  | $ | (2,448,350) |  |  |  |  | $ | (65,743) |  |  | $ | 21,308 |  |  |
Purchases of common stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (21) |  |  | — |  |  | (164) |  |  | — |  |  |  |  | (164) |  |  | — |  |  |
Equity-based compensation |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 830 |  |  | — |  |  |  |  | 830 |  |  | 445 |  |  |
Issuance of restricted shares/units |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 33 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  |
Common stock offering costs |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  |
Dividends declared – preferred stock –Series D ($0.53/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (621) |  |  |  |  | (621) |  |  | — |  |  |
Dividends declared – preferred stock – Series F ($0.46/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (577) |  |  |  |  | (577) |  |  | — |  |  |
Dividends declared – preferred stock – Series G ($0.46/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (706) |  |  |  |  | (706) |  |  | — |  |  |
Dividends declared – preferred stock – Series H ($0.47/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (613) |  |  |  |  | (613) |  |  | — |  |  |
Dividends declared – preferred stock – Series I ($0.47/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (587) |  |  |  |  | (587) |  |  | — |  |  |
Redemption value adjustment |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (466) |  |  |  |  | (466) |  |  | 466 |  |  |
Net income (loss) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (22,092) |  |  |  |  | (22,092) |  |  | (231) |  |  |
Balance at September 30, 2022 |  |  |  |  | 1,174 |  |  | $ | 12 |  |  | 1,251 |  |  | $ | 12 |  |  | 1,532 |  |  | $ | 15 |  |  | 1,308 |  |  | $ | 13 |  |  | 1,253 |  |  | $ | 13 |  |  | 34,499 |  |  | $ | 345 |  |  | $ | 2,382,863 |  |  | $ | (2,474,012) |  |  |  |  | $ | (90,739) |  |  | $ | 21,988 |  |  |

|  |  |  |  | Preferred Stock |  |  |  | Additional Paid-in Capital |  | Accumulated Deficit |  |  |  | Total |  | Redeemable Noncontrolling Interests in Operating Partnership
|  |  | Series D |  | Series F |  | Series G |  | Series H |  | Series I |  | Common Stock |  |  |  |  |
|  |  |  |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |
Balance at December 31, 2021 |  |  |  |  | 1,174 |  |  | $ | 12 |  |  | 1,251 |  |  | $ | 12 |  |  | 1,532 |  |  | $ | 15 |  |  | 1,308 |  |  | $ | 13 |  |  | 1,253 |  |  | $ | 13 |  |  | 34,490 |  |  | $ | 345 |  |  | $ | 2,379,906 |  |  | $ | (2,382,970) |  |  |  |  | $ | (2,654) |  |  | $ | 22,742 |
Purchases of common stock |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (42) |  |  | — |  |  | (316) |  |  | — |  |  |  |  | (316) |  |  | — |
Equity-based compensation |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,438 |  |  | — |  |  |  |  | 3,438 |  |  | 1,886 |
Forfeitures of restricted shares |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Issuance of restricted shares/units |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 52 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Common stock offering costs |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (165) |  |  | — |  |  |  |  | (165) |  |  | — |
Dividends declared – preferred stock – Series D ($1.58/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,861) |  |  |  |  | (1,861) |  |  | — |
Dividends declared – preferred stock – Series F ($1.38/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,730) |  |  |  |  | (1,730) |  |  | — |
Dividends declared – preferred stock – Series G ($1.38/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,118) |  |  |  |  | (2,118) |  |  | — |
Dividends declared – preferred stock – Series H ($1.41/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,840) |  |  |  |  | (1,840) |  |  | — |
Dividends declared – preferred stock – Series I ($1.41/share) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,762) |  |  |  |  | (1,762) |  |  | — |
Redemption value adjustment |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,961 |  |  |  |  | 1,961 |  |  | (1,961) |
Net income (loss) |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (83,692) |  |  |  |  | (83,692) |  |  | (679) |
Balance at September 30, 2022 |  |  |  |  | 1,174 |  |  | $ | 12 |  |  | 1,251 |  |  | $ | 12 |  |  | 1,532 |  |  | $ | 15 |  |  | 1,308 |  |  | $ | 13 |  |  | 1,253 |  |  | $ | 13 |  |  | 34,499 |  |  | $ | 345 |  |  | $ | 2,382,863 |  |  | $ | (2,474,012) |  |  |  |  | $ | (90,739) |  |  | $ | 21,988 |

7

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

| Nine Months Ended September 30,
| 2023 |  | 2022 |  |
Cash Flows from Operating Activities |  |  |  |  |
Net income (loss) | $ | (150,930) |  |  | $ | (84,371) |  |  |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |  |  |  |
Depreciation and amortization | 140,963 |  |  | 152,444 |  |  |
Amortization of intangibles | (44) |  |  | 78 |  |  |
Recognition of deferred income | (374) |  |  | (374) |  |  |
Bad debt expense | 2,887 |  |  | 2,456 |  |  |
Deferred income tax expense (benefit) | 4 |  |  | 141 |  |  |
Equity in (earnings) loss of unconsolidated entities | 715 |  |  | 451 |  |  |
(Gain) loss on consolidation of VIE and disposition of assets | (7,443) |  |  | (273) |  |  |
Realized and unrealized (gain) loss on derivatives | (4,490) |  |  | (19,059) |  |  |
Amortization of loan costs, discounts and capitalized default interest and write-off of premiums, loan costs and exit fees | 20,415 |  |  | 7,760 |  |  |
Equity-based compensation | 4,374 |  |  | 5,324 |  |  |
Non-cash interest income | (497) |  |  | (262) |  |  |
Changes in operating assets and liabilities, exclusive of the effect of the disposition of hotel properties and the impact of consolidation of VIE: |  |  |  |  |
Accounts receivable and inventories | (28,630) |  |  | (24,893) |  |  |
Prepaid expenses and other assets | 3,995 |  |  | (7,257) |  |  |
Accounts payable and accrued expenses and accrued interest payable | 45,518 |  |  | 10,401 |  |  |
Due to/from related parties | 960 |  |  | 148 |  |  |
Due to/from third-party hotel managers | (1,868) |  |  | (942) |  |  |
Due to/from Ashford Inc., net | 10,503 |  |  | (2,286) |  |  |
Operating lease liabilities | 226 |  |  | (325) |  |  |
Operating lease right-of-use assets | (231) |  |  | 355 |  |  |
Other liabilities | (4) |  |  | (6) |  |  |
Net cash provided by (used in) operating activities | 36,049 |  |  | 39,510 |  |  |
Cash Flows from Investing Activities |  |  |  |  |
Improvements and additions to hotel properties | (99,482) |  |  | (68,054) |  |  |
Net proceeds from disposition of assets and hotel properties | 14,452 |  |  | 34,707 |  |  |
Payments for initial franchise fees | (402) |  |  | — |  |  |
Proceeds from notes receivable | 5,250 |  |  | 4,000 |  |  |
Issuance of note receivable | (5,722) |  |  | — |  |  |
Proceeds from property insurance | 1,788 |  |  | 1,009 |  |  |
Restricted cash received from initial consolidation of VIE | 18,201 |  |  | — |  |  |
Net cash provided by (used in) investing activities | (65,915) |  |  | (28,338) |  |  |
Cash Flows from Financing Activities |  |  |  |  |
Borrowings on indebtedness | 101,732 |  |  | 1,552 |  |  |
Repayments of indebtedness | (342,935) |  |  | (49,326) |  |  |
Payments for loan costs and exit fees | (10,491) |  |  | (2,298) |  |  |
Payments for dividends and distributions | (10,649) |  |  | (9,312) |  |  |
Purchases of common stock | (90) |  |  | (316) |  |  |
Redemption of preferred stock | (75) |  |  | — |  |  |
Payments for derivatives | (22,285) |  |  | (5,255) |  |  |
Proceeds from derivatives | 47,565 |  |  | — |  |  |
Common stock offering costs | — |  |  | (273) |  |  |
Proceeds from preferred stock offerings | 60,102 |  |  | — |  |  |
Payments on finance lease liabilities | (307) |  |  | — |  |  |
Contributions from noncontrolling interest in consolidated entities | 5,192 |  |  | — |  |  |
Net cash provided by (used in) financing activities | (172,241) |  |  | (65,228) |  |  |
Net increase (decrease) in cash, cash equivalents and restricted cash (including cash, cash equivalents and restricted cash held for sale) | (202,107) |  |  | (54,056) |  |  |
Cash, cash equivalents and restricted cash at beginning of period | 559,026 |  |  | 691,644 |  |  |
Cash, cash equivalents and restricted cash at end of period (including cash, cash equivalents and restricted cash held for sale) | $ | 356,919 |  |  | $ | 637,588 |  |  |

8

| Nine Months Ended September 30,
| 2023 |  | 2022 |  |
Supplemental Cash Flow Information |  |  |  |  |
Interest paid | $ | 242,339 |  |  | $ | 153,155 |  |  |
Income taxes paid (refunded) | (2,947) |  |  | 7,419 |  |  |
Supplemental Disclosure of Non-Cash Investing and Financing Activities |  |  |  |  |
Accrued but unpaid capital expenditures | $ | 16,917 |  |  | $ | 14,996 |  |  |
Accrued stock offering costs | — |  |  | 1,219 |  |  |
Non-cash preferred stock dividends | 191 |  |  | — |  |  |
Unsettled proceeds from derivatives | 1,782 |  |  | — |  |  |
Dividends and distributions declared but not paid | 3,568 |  |  | 3,103 |  |  |
Assumption of debt from consolidation of VIE | 35,052 |  |  | — |  |  |
Assumption of other finance liability from consolidation of VIE | 26,729 |  |  | — |  |  |
Acquisition of hotel property from consolidation of VIE | 61,100 |  |  | — |  |  |
Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash |  |  |  |  |
Cash and cash equivalents at beginning of period | $ | 417,064 |  |  | $ | 592,110 |  |  |
Restricted cash at beginning of period | 141,962 |  |  | 99,534 |  |  |
Cash, cash equivalents and restricted cash at beginning of period | $ | 559,026 |  |  | $ | 691,644 |  |  |
Cash and cash equivalents at end of period | $ | 184,181 |  |  | $ | 505,533 |  |  |
Restricted cash at end of period | 171,896 |  |  | 132,055 |  |  |
Cash, cash equivalents and restricted cash at end of period | 356,077 |  |  | 637,588 |  |  |
Cash and cash equivalents at end of period included in assets held for sale | 556 |  |  | — |  |  |
Restricted cash at end of period included in assets held for sale | 286 |  |  | — |  |  |
Cash, cash equivalents and restricted cash at end of period (including cash, cash equivalents and restricted cash held for sale) | $ | 356,919 |  |  | $ | 637,588 |  |  |

See Notes to Consolidated Financial Statements.
9

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Description of Business
Ashford Hospitality Trust, Inc., together with its subsidiaries (“Ashford Trust”), is a real estate investment trust (“REIT”). While our portfolio currently consists of upscale hotels and upper upscale full-service hotels, our investment strategy is predominantly focused on investing in upper upscale full-service hotels in the United States that have revenue per available room (“RevPAR”) generally less than twice the U.S. national average, and in all methods including direct real estate, equity, and debt. We currently anticipate future investments will predominantly be in upper upscale hotels. We own our lodging investments and conduct our business through Ashford Hospitality Limited Partnership (“Ashford Trust OP”), our operating partnership. Ashford OP General Partner LLC, a wholly owned subsidiary of Ashford Trust, serves as the sole general partner of our operating partnership. Terms such as the “Company,” “we,” “us,” or “our” refer to Ashford Hospitality Trust, Inc. and, as the context may require, all entities included in its consolidated financial statements.
Our hotel properties are primarily branded under the widely recognized upscale and upper upscale brands of Hilton, Hyatt, Marriott and Intercontinental Hotel Group. As of September 30, 2023, we held interests in the following assets:
•100 consolidated operating hotel properties, which represent 22,316 total rooms;
•one consolidated hotel property under development through a 32.5% owned investment in a consolidated entity;
•15.1% ownership in OpenKey, Inc. (“OpenKey”) with a carrying value of approximately $1.7 million; and
•an investment in an entity that owns the Meritage Resort and Spa and the Grand Reserve at the Meritage (the “Meritage Investment”) in Napa, California, with a carrying value of approximately $8.7 million.
For U.S. federal income tax purposes, we have elected to be treated as a REIT, which imposes limitations related to operating hotels. As of September 30, 2023, our 100 operating hotel properties were leased or owned by our wholly owned subsidiaries that are treated as taxable REIT subsidiaries for U.S. federal income tax purposes (collectively, these subsidiaries are referred to as “Ashford TRS”). Ashford TRS then engages third-party or affiliated hotel management companies to operate the hotels under management contracts. Hotel operating results related to these properties are included in the consolidated statements of operations.
We are advised by Ashford Hospitality Advisors LLC (“Ashford LLC”), a subsidiary of Ashford Inc., through an advisory agreement. Our 100 operating hotel properties in our consolidated portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.
We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them for us under management contracts. Remington Lodging & Hospitality, LLC (“Remington Hospitality”), a subsidiary of Ashford Inc., manages 68 of our 100 operating hotel properties. Third-party management companies manage the remaining hotel properties.
Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to, design and construction services, debt placement and related services, audio visual services, real estate advisory services, insurance claims services, hypoallergenic premium rooms, broker-dealer and distribution services and mobile key technology.
2. Significant Accounting Policies
Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These consolidated financial statements include the accounts of Ashford Hospitality Trust, Inc., its majority-owned subsidiaries, and its majority-owned joint ventures in which it has a controlling interest. All inter-company accounts and transactions between consolidated entities have been eliminated in these consolidated financial statements. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto
10

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
included in our 2022 Annual Report to Stockholders on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 10, 2023.
Ashford Trust OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. All major decisions related to Ashford Trust OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly owned subsidiary, Ashford OP General Partner LLC, its general partner. As such, we consolidate Ashford Trust OP.
815 Commerce Managing Member, LLC (“815 Commerce MM”) is considered to be a VIE, as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. During the third quarter of 2023, the Company funded a $2.7 million default loan to the manager of 815 Commerce MM to satisfy a balancing deposit that was required by the property construction lender. The total amount of balancing deposits required by the property construction lender are up to $9.5 million. At September 30, 2023 the Company has funded $5.7 million. In connection with the default loan funding, Ashford Trust obtained the ability to exercise its kick-out rights of the manager of 815 Commerce MM. As a result, Ashford Trust became the primary beneficiary and consolidated 815 Commerce MM as of May 31, 2023. The Company includes the assets and liabilities related to the VIE in the consolidated financial statements. The assets of the VIE can be used only to settle liabilities of that VIE. Creditors (or beneficial interest holders) of the VIE do not have recourse to the Company’s general credit. See note 4.
Historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
The following transactions affect reporting comparability of our consolidated financial statements:

Property |  | Location |  | Type |  | Date
Sheraton Ann Arbor |  | Ann Arbor, MI |  | Disposition |  | September 1, 2022
Hilton Marietta |  | Marietta, GA |  | Acquisition |  | December 16, 2022
WorldQuest Resort |  | Orlando, FL |  | Disposition |  | August 1, 2023

Use of Estimates—The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Standards—In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provides optional guidance through December 31, 2022 to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which further clarified the scope of the reference rate reform optional practical expedients and exceptions outlined in Topic 848. The amendments in ASU Nos. 2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge effectiveness in hedging relationships that have been modified to replace a reference rate. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848), which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The Company applied the optional expedient in evaluating debt modifications converting from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”). The Company adopted the standards effective December 31, 2022. There was no material impact as a result of this adoption.
11

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
3. Revenue
The following tables present our revenue disaggregated by geographical area (dollars in thousands):

|  | Three Months Ended September 30, 2023
Primary Geographical Market |  | Number of Hotels |  | Rooms |  | Food and Beverage |  | Other Hotel |  | Other |  | Total
Atlanta, GA Area |  | 10 |  |  | $ | 20,076 |  |  | $ | 4,516 |  |  | $ | 1,639 |  |  | $ | — |  |  | $ | 26,231 |
Boston, MA Area |  | 2 |  |  | 18,613 |  |  | 1,496 |  |  | 1,611 |  |  | — |  |  | 21,720 |
Dallas / Ft. Worth, TX Area |  | 7 |  |  | 13,729 |  |  | 3,056 |  |  | 1,008 |  |  | — |  |  | 17,793 |
Houston, TX Area |  | 3 |  |  | 6,588 |  |  | 2,248 |  |  | 166 |  |  | — |  |  | 9,002 |
Los Angeles, CA Metro Area |  | 6 |  |  | 20,679 |  |  | 4,237 |  |  | 1,401 |  |  | — |  |  | 26,317 |
Miami, FL Metro Area |  | 2 |  |  | 4,324 |  |  | 1,412 |  |  | 260 |  |  | — |  |  | 5,996 |
Minneapolis - St. Paul, MN Area |  | 2 |  |  | 4,629 |  |  | 1,479 |  |  | 154 |  |  | — |  |  | 6,262 |
Nashville, TN Area |  | 1 |  |  | 14,775 |  |  | 6,731 |  |  | 944 |  |  | — |  |  | 22,450 |
New York / New Jersey Metro Area |  | 6 |  |  | 18,577 |  |  | 5,212 |  |  | 919 |  |  | — |  |  | 24,708 |
Orlando, FL Area |  | 2 |  |  | 4,780 |  |  | 355 |  |  | 499 |  |  | — |  |  | 5,634 |
Philadelphia, PA Area |  | 3 |  |  | 6,057 |  |  | 610 |  |  | 371 |  |  | — |  |  | 7,038 |
San Diego, CA Area |  | 2 |  |  | 6,401 |  |  | 295 |  |  | 360 |  |  | — |  |  | 7,056 |
San Francisco - Oakland, CA Metro Area |  | 7 |  |  | 17,975 |  |  | 1,780 |  |  | 718 |  |  | — |  |  | 20,473 |
Tampa, FL Area |  | 2 |  |  | 5,941 |  |  | 1,492 |  |  | 522 |  |  | — |  |  | 7,955 |
Washington D.C. - MD - VA Area |  | 9 |  |  | 31,069 |  |  | 5,442 |  |  | 2,379 |  |  | — |  |  | 38,890 |
Other Areas |  | 36 |  |  | 76,112 |  |  | 11,835 |  |  | 6,526 |  |  | — |  |  | 94,473 |
Disposed properties (1) |  | — |  |  | 282 |  |  | 9 |  |  | 60 |  |  | — |  |  | 351 |
Corporate |  | — |  |  | — |  |  | — |  |  | — |  |  | 665 |  |  | 665 |
Total |  | 100 |  |  | $ | 270,607 |  |  | $ | 52,205 |  |  | $ | 19,537 |  |  | $ | 665 |  |  | $ | 343,014 |

|  | Three Months Ended September 30, 2022
Primary Geographical Market |  | Number of Hotels |  | Rooms |  | Food and Beverage |  | Other Hotel |  | Other |  | Total
Atlanta, GA Area |  | 9 |  |  | $ | 17,841 |  |  | $ | 4,154 |  |  | $ | 1,438 |  |  | $ | — |  |  | $ | 23,433 |
Boston, MA Area |  | 2 |  |  | 15,562 |  |  | 1,363 |  |  | 1,453 |  |  | — |  |  | 18,378 |
Dallas / Ft. Worth, TX Area |  | 7 |  |  | 12,867 |  |  | 3,047 |  |  | 889 |  |  | — |  |  | 16,803 |
Houston, TX Area |  | 3 |  |  | 5,958 |  |  | 1,543 |  |  | 243 |  |  | — |  |  | 7,744 |
Los Angeles, CA Metro Area |  | 6 |  |  | 19,515 |  |  | 3,132 |  |  | 1,252 |  |  | — |  |  | 23,899 |
Miami, FL Metro Area |  | 2 |  |  | 4,816 |  |  | 1,617 |  |  | 155 |  |  | — |  |  | 6,588 |
Minneapolis - St. Paul, MN Area |  | 2 |  |  | 4,361 |  |  | 1,335 |  |  | 163 |  |  | — |  |  | 5,859 |
Nashville, TN Area |  | 1 |  |  | 13,705 |  |  | 5,997 |  |  | 1,047 |  |  | — |  |  | 20,749 |
New York / New Jersey Metro Area |  | 6 |  |  | 16,316 |  |  | 4,594 |  |  | 876 |  |  | — |  |  | 21,786 |
Orlando, FL Area |  | 2 |  |  | 4,981 |  |  | 407 |  |  | 430 |  |  | — |  |  | 5,818 |
Philadelphia, PA Area |  | 3 |  |  | 6,120 |  |  | 632 |  |  | 196 |  |  | — |  |  | 6,948 |
San Diego, CA Area |  | 2 |  |  | 6,127 |  |  | 154 |  |  | 334 |  |  | — |  |  | 6,615 |
San Francisco - Oakland, CA Metro Area |  | 7 |  |  | 19,580 |  |  | 1,588 |  |  | 931 |  |  | — |  |  | 22,099 |
Tampa, FL Area |  | 2 |  |  | 5,389 |  |  | 1,472 |  |  | 267 |  |  | — |  |  | 7,128 |
Washington D.C. - MD - VA Area |  | 9 |  |  | 28,429 |  |  | 5,102 |  |  | 2,501 |  |  | — |  |  | 36,032 |
Other Areas |  | 36 |  |  | 76,267 |  |  | 12,266 |  |  | 5,565 |  |  | — |  |  | 94,098 |
Disposed properties (1) |  | 1 |  |  | 2,782 |  |  | 230 |  |  | 443 |  |  | — |  |  | 3,455 |
Corporate |  | — |  |  | — |  |  | — |  |  | — |  |  | 724 |  |  | 724 |
Total |  | 100 |  |  | $ | 260,616 |  |  | $ | 48,633 |  |  | $ | 18,183 |  |  | $ | 724 |  |  | $ | 328,156 |

12

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

|  | Nine Months Ended September 30, 2023
Primary Geographical Market |  | Number of Hotels |  | Rooms |  | Food and Beverage |  | Other Hotel |  | Other |  | Total
Atlanta, GA Area |  | 10 |  |  | $ | 60,885 |  |  | $ | 14,684 |  |  | $ | 4,912 |  |  | $ | — |  |  | $ | 80,481 |
Boston, MA Area |  | 2 |  |  | 46,523 |  |  | 4,250 |  |  | 4,666 |  |  | — |  |  | 55,439 |
Dallas / Ft. Worth, TX Area |  | 7 |  |  | 45,889 |  |  | 12,350 |  |  | 3,002 |  |  | — |  |  | 61,241 |
Houston, TX Area |  | 3 |  |  | 20,575 |  |  | 7,500 |  |  | 647 |  |  | — |  |  | 28,722 |
Los Angeles, CA Metro Area |  | 6 |  |  | 64,027 |  |  | 13,630 |  |  | 3,807 |  |  | — |  |  | 81,464 |
Miami, FL Metro Area |  | 2 |  |  | 19,053 |  |  | 6,490 |  |  | 698 |  |  | — |  |  | 26,241 |
Minneapolis - St. Paul, MN |  | 2 |  |  | 10,984 |  |  | 3,536 |  |  | 588 |  |  | — |  |  | 15,108 |
Nashville, TN Area |  | 1 |  |  | 43,361 |  |  | 21,673 |  |  | 2,668 |  |  | — |  |  | 67,702 |
New York / New Jersey Metro Area |  | 6 |  |  | 47,937 |  |  | 15,784 |  |  | 2,410 |  |  | — |  |  | 66,131 |
Orlando, FL Area |  | 2 |  |  | 18,015 |  |  | 1,274 |  |  | 1,515 |  |  | — |  |  | 20,804 |
Philadelphia, PA Area |  | 3 |  |  | 17,030 |  |  | 1,789 |  |  | 868 |  |  | — |  |  | 19,687 |
San Diego, CA Area |  | 2 |  |  | 16,741 |  |  | 941 |  |  | 1,044 |  |  | — |  |  | 18,726 |
San Francisco - Oakland, CA Metro Area |  | 7 |  |  | 51,891 |  |  | 5,584 |  |  | 2,120 |  |  | — |  |  | 59,595 |
Tampa, FL Area |  | 2 |  |  | 23,283 |  |  | 5,489 |  |  | 1,444 |  |  | — |  |  | 30,216 |
Washington D.C. - MD - VA Area |  | 9 |  |  | 98,536 |  |  | 18,599 |  |  | 6,620 |  |  | — |  |  | 123,755 |
Other Areas |  | 36 |  |  | 230,488 |  |  | 39,290 |  |  | 17,523 |  |  | — |  |  | 287,301 |
Disposed properties (1) |  | — |  |  | 2,259 |  |  | 80 |  |  | 603 |  |  | — |  |  | 2,942 |
Corporate |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,094 |  |  | 2,094 |
Total |  | 100 |  |  | $ | 817,477 |  |  | $ | 172,943 |  |  | $ | 55,135 |  |  | $ | 2,094 |  |  | $ | 1,047,649 |

|  | Nine Months Ended September 30, 2022
Primary Geographical Market |  | Number of Hotels |  | Rooms |  | Food and Beverage |  | Other Hotel |  | Other |  | Total
Atlanta, GA Area |  | 9 |  |  | $ | 49,046 |  |  | $ | 11,639 |  |  | $ | 3,787 |  |  | $ | — |  |  | $ | 64,472 |
Boston, MA Area |  | 2 |  |  | 37,500 |  |  | 3,993 |  |  | 3,872 |  |  | — |  |  | 45,365 |
Dallas / Ft. Worth, TX Area |  | 7 |  |  | 40,145 |  |  | 9,410 |  |  | 2,742 |  |  | — |  |  | 52,297 |
Houston, TX Area |  | 3 |  |  | 17,741 |  |  | 5,232 |  |  | 635 |  |  | — |  |  | 23,608 |
Los Angeles, CA Metro Area |  | 6 |  |  | 58,016 |  |  | 9,734 |  |  | 3,624 |  |  | — |  |  | 71,374 |
Miami, FL Metro Area |  | 2 |  |  | 18,821 |  |  | 5,803 |  |  | 674 |  |  | — |  |  | 25,298 |
Minneapolis - St. Paul, MN |  | 2 |  |  | 9,303 |  |  | 2,705 |  |  | 337 |  |  | — |  |  | 12,345 |
Nashville, TN Area |  | 1 |  |  | 40,041 |  |  | 18,006 |  |  | 3,077 |  |  | — |  |  | 61,124 |
New York / New Jersey Metro Area |  | 6 |  |  | 39,634 |  |  | 12,041 |  |  | 2,066 |  |  | — |  |  | 53,741 |
Orlando, FL Area |  | 2 |  |  | 16,557 |  |  | 1,102 |  |  | 1,181 |  |  | — |  |  | 18,840 |
Philadelphia, PA Area |  | 3 |  |  | 16,394 |  |  | 1,638 |  |  | 669 |  |  | — |  |  | 18,701 |
San Diego, CA Area |  | 2 |  |  | 15,384 |  |  | 573 |  |  | 1,001 |  |  | — |  |  | 16,958 |
San Francisco - Oakland, CA Metro Area |  | 7 |  |  | 46,923 |  |  | 3,992 |  |  | 2,302 |  |  | — |  |  | 53,217 |
Tampa, FL Area |  | 2 |  |  | 19,600 |  |  | 4,500 |  |  | 891 |  |  | — |  |  | 24,991 |
Washington D.C. - MD - VA Area |  | 9 |  |  | 80,263 |  |  | 14,533 |  |  | 5,972 |  |  | — |  |  | 100,768 |
Other Areas |  | 36 |  |  | 218,243 |  |  | 33,848 |  |  | 15,971 |  |  | — |  |  | 268,062 |
Disposed properties (1) |  | 1 |  |  | 7,863 |  |  | 960 |  |  | 1,241 |  |  | — |  |  | 10,064 |
Corporate |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,164 |  |  | 2,164 |
Total |  | 100 |  |  | $ | 731,474 |  |  | $ | 139,709 |  |  | $ | 50,042 |  |  | $ | 2,164 |  |  | $ | 923,389 |

_____________________________
(1) Includes WorldQuest Resort that was sold on August 1, 2023. See note 5.
13

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
4. Investments in Hotel Properties, net
Investments in hotel properties, net consisted of the following (in thousands):

| September 30, 2023 |  | December 31, 2022
Land | $ | 625,331 |  |  | $ | 622,759 |
Buildings and improvements | 3,580,947 |  |  | 3,650,464 |
Furniture, fixtures and equipment | 195,338 |  |  | 222,665 |
Construction in progress | 110,076 |  |  | 21,609 |
Condominium properties | — |  |  | 9,889 |
Hilton Marietta finance lease | 17,269 |  |  | 18,998 |
Total cost | 4,528,961 |  |  | 4,546,384 |
Accumulated depreciation | (1,406,128) |  |  | (1,428,053) |
Investments in hotel properties, net | $ | 3,122,833 |  |  | $ | 3,118,331 |

Consolidation of VIE
On May 31, 2023, Ashford Trust obtained the ability to exercise its kick-out rights of the manager of 815 Commerce MM, which is developing the Le Meridien hotel in Fort Worth, Texas. As a result, Ashford Trust became the primary beneficiary and began consolidating 815 Commerce MM. The hotel property under development is subject to a 99-year lease of the land and building that has been accounted for as a failed sale and leaseback as described below.
The Company determined that 815 Commerce MM is a VIE that is not a business. As such, the Company measured and recognized 100% of the identifiable assets acquired, the liabilities assumed and any noncontrolling interests of 815 Commerce MM, at fair value. The Company recognized a gain of $1.1 million that represented the difference between the fair value of the assets and liabilities recognized, the fair value of the non-controlling interest and the previous carrying value of the Company’s investment in 815 Commerce MM. The gain is included in “gain (loss) on consolidation of VIE and disposition of assets” in the consolidated statements of operations.
The following table summarizes the assets and liabilities of 815 Commerce MM that were initially consolidated on May 31, 2023, upon Ashford Trust becoming the primary beneficiary (in thousands):

Land | $ | 4,609 |
Construction in progress | 56,591 |
Restricted cash | 18,201 |
Deferred costs | 92 |
Indebtedness | (35,052) |
Other finance liability | (26,729) |
Accounts payable and accrued expenses | (88) |
Accrued interest payable | (104) |
Noncontrolling interest in consolidated entities | (7,961) |
Investment in 815 Commerce MM | $ | 9,559 |

Other Finance Liability
On November 10, 2021, the 815 Commerce LLC entered into a purchase and sale agreement. Pursuant to the purchase and sale agreement, 815 Commerce LLC sold its land and building in Fort Worth, Texas (the “Property”) for $30.4 million. Concurrent with the sale of the Property, 815 Commerce LLC entered into a 99-year lease agreement (the “Lease Agreement”), whereby 815 Commerce LLC will lease back the Property at an annual rental rate of approximately $1.5 million, subject to annual rent increases of 2.0%. Under the Lease Agreement, 815 Commerce LLC has a purchase option between 90-180 days prior to the commencement of the 36 th lease year.
14

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
In accordance with ASC 842, Leases, this transaction was recorded as a failed sale and leaseback as there are not alternative assets, substantially the same as the transferred asset, readily available in the marketplace for the repurchase option to qualify as a sale leaseback. Upon consolidation of 815 Commerce LLC in May 2023, the Company utilized a discount rate of 8.2% to determine the fair value of the finance liability. As of September 30, 2023, no depreciation has been recorded as the building is under development. The finance liability is recognized in “other finance liability” on the Company's consolidated balance sheet as of September 30, 2023.
5. Dispositions, Impairment Charges and Assets Held For Sale
Dispositions
On August 1, 2023, the Company sold the WorldQuest Resort in Orlando, Florida (“WorldQuest”) for $14.8 million in cash. The sale resulted in a gain of approximately $6.4 million for the three and nine months ended September 30, 2023, which was included in “gain (loss) on consolidation of VIE and disposition of assets” in the consolidated statements of operations.
The results of operations for disposed hotel properties are included in net income (loss) through the date of disposition. See note 2 for the fiscal year 2022 and 2023 dispositions. The following table includes condensed financial information for the three and nine months ended September 30, 2023 and 2022 f rom the Company’s dispositions (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Total hotel revenue | $ | 351 |  |  | $ | 3,455 |  |  | $ | 2,942 |  |  | $ | 10,064 |  |  |
Total hotel operating expenses | (1,570) |  |  | (2,498) |  |  | (3,872) |  |  | (7,800) |  |  |
Gain (loss) on disposition of assets and hotel properties | 6,389 |  |  | (29) |  |  | 6,389 |  |  | 244 |  |  |
Property taxes, insurance and other | (39) |  |  | (197) |  |  | (164) |  |  | (617) |  |  |
Depreciation and amortization | — |  |  | (122) |  |  | (163) |  |  | (1,580) |  |  |
Operating income (loss) | 5,131 |  |  | 609 |  |  | 5,132 |  |  | 311 |  |  |
Interest income | — |  |  | — |  |  | — |  |  | 1 |  |  |
Interest expense and amortization of discounts and loan costs | — |  |  | (207) |  |  | — |  |  | (955) |  |  |
Income (loss) before income taxes | 5,131 |  |  | 402 |  |  | 5,132 |  |  | (643) |  |  |
(Income) loss before income taxes attributable to redeemable noncontrolling interests in operating partnership | (66) |  |  | (4) |  |  | (57) |  |  | 5 |  |  |
Net income (loss) before income taxes attributable to the Company | $ | 5,065 |  |  | $ | 398 |  |  | $ | 5,075 |  |  | $ | (638) |  |  |

Impairment Charges
For the three and nine months ended September 30, 2023 and 2022, no impairment charges were recorded.
Assets Held For Sale
On August 4, 2023, the Company entered into a purchase and sale agreement for the Sheraton Bucks County hotel in Langhorne, Pennsylvania. As of September 30, 2023, the Sheraton Bucks County was classified as held for sale. We classify assets as held for sale when we have obtained a firm commitment from a buyer, and consummation of the sale is considered probable and expected within one year. Depreciation and amortization ceased as of the date the assets were deemed held for sale. Since the sale of the Sheraton Bucks County does not represent a strategic shift that has (or will have) a major effect on our operations or financial results, its results of operations were not reported as discontinued operations in the consolidated financial statements. See note 19.
15

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The major classes of assets and liabilities related to assets held for sale included in the consolidated balance sheet at September 30, 2023 were as follows:

| September 30, 2023 |
Assets |  |
Investments in hotel properties, net | $ | 9,458 |  |
Cash and cash equivalents | 556 |  |
Restricted cash | 286 |  |
Accounts receivable, net | 228 |  |
Inventories | 43 |  |
Deferred costs, net | 3 |  |
Prepaid expenses | 193 |  |
Other assets | 49 |  |
Due from related party, net | 57 |  |
Due from Ashford Inc., net | 9 |  |
Assets held for sale | $ | 10,882 |  |
Liabilities |  |
Indebtedness, net | $ | 9,247 |  |
Accounts payable and accrued expenses | 510 |  |
Accrued interest | 38 |  |
Liabilities related to assets held for sale | $ | 9,795 |  |

6. Investments in Unconsolidated Entities
OpenKey, which is controlled and consolidated by Ashford Inc., is a hospitality-focused mobile key platform that provides a universal smart phone app and related hardware and software for keyless entry into hotel guest rooms. Our investment is recorded as a component of “investment in unconsolidated entities” in our consolidated balance sheets and is accounted for under the equity method of accounting as we have been deemed to have significant influence over the entity under the applicable accounting guidance. As of September 30, 2023, the Company has made investments in OpenKey totaling approximately $5.5 million.
At December 31, 2022, the Company held an investment in 815 Commerce MM of approximately $8.5 million, which is developing the Le Meridien Fort Worth. Our investment was recorded as a component of “investment in unconsolidated entities” in our consolidated balance sheet and was accounted for under the equity method of accounting as we were deemed to have significant influence over the entity under the applicable accounting guidance. During the second quarter of 2023, Ashford Trust obtained the ability to exercise their kick-out rights of the manager of 815 Commerce MM. As a result, Ashford Trust became the primary beneficiary and consolidated 815 Commerce MM. See note 2. As a result of consolidating 815 Commerce MM, the Company’s investment is no longer reflected in “investments in unconsolidated entities” on the consolidated balance sheet.
In November 2022, the Company made an initial investment of $9.1 million in an entity that owns the Meritage Investment in Napa, California. Our investment is recorded as a component of “investment in unconsolidated entities” in our consolidated balance sheets and is accounted for under the equity method of accounting as we have been deemed to have significant influence over the entity under the applicable accounting guidance.
The following table summarizes our carrying value and ownership interest in unconsolidated entities:

| September 30, 2023 |  | December 31, 2022
Carrying value of the investment in OpenKey (in thousands) | $ | 1,676 |  |  | $ | 2,103 |
Ownership interest in OpenKey | 15.1 | % |  | 15.1 | %
Carrying value of the Meritage Investment (in thousands) | $ | 8,703 |  |  | $ | 8,991 |

16

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes our equity in earnings (loss) of unconsolidated entities (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |
OpenKey |  | $ | (125) |  |  | $ | (147) |  |  | $ | (427) |  |  | $ | (451) |  |  |
Meritage Investment |  | (13) |  |  | — |  |  | (288) |  |  | — |  |  |
|  | $ | (138) |  |  | $ | (147) |  |  | $ | (715) |  |  | $ | (451) |  |  |

We review our investments in unconsolidated entities for impairment each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of the investment. Any other-than-temporary impairment is recorded in equity in earnings (loss) of unconsolidated entities. No impairment charges were recorded during the three and nine months ended September 30, 2023 and 2022.
17

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
7. Indebtedness, net
Indebtedness consisted of the following (in thousands):

|  |  |  |  |  |  |  |  |  |  |  | September 30, 2023 |  | December 31, 2022
Indebtedness |  | Collateral |  | Maturity |  | Interest Rate (1) |  | Default Rate (2) |  | Debt Balance |  |  |  | Debt Balance |  |
Mortgage loan (5) |  | 1 | hotel |  | June 2023 |  | LIBOR(3) + | 2.45 | % |  | n/a |  | $ | — |  |  |  |  | $ | 73,450 |  |  |
Mortgage loan (6) |  | 7 | hotels |  | June 2023 |  | SOFR(4) + | 3.70 | % |  | 4.00% |  | 180,720 |  |  |  |  | 180,720 |  |  |
Mortgage loan (7) |  | 7 | hotels |  | June 2023 |  | SOFR(4) + | 3.44 | % |  | 4.00% |  | 174,400 |  |  |  |  | 174,400 |  |  |
Mortgage loan (8) |  | 5 | hotels |  | June 2023 |  | SOFR(4) + | 3.73 | % |  | 4.00% |  | 215,120 |  |  |  |  | 215,120 |  |  |
Mortgage loan (5) |  | 1 | hotel |  | November 2023 |  | SOFR(4) + | 2.80 | % |  | n/a |  | — |  |  |  |  | 25,000 |  |  |
Mortgage loan (9) (10) |  | 17 | hotels |  | November 2023 |  | SOFR(4) + | 3.26 | % |  | n/a |  | 409,750 |  |  |  |  | 415,000 |  |  |
Mortgage loan (11) |  | 1 | hotel |  | December 2023 |  | SOFR(4) + | 2.85 | % |  | n/a |  | 15,175 |  |  |  |  | 15,290 |  |  |
Mortgage loan |  | 1 | hotel |  | January 2024 |  |  | 5.49 | % |  | n/a |  | 6,231 |  |  |  |  | 6,345 |  |  |
Mortgage loan |  | 1 | hotel |  | January 2024 |  |  | 5.49 | % |  | n/a |  | 9,093 |  |  |  |  | 9,261 |  |  |
Term loan (12) |  |  | Equity |  | January 2024 |  |  | 14.00 | % |  | n/a |  | 183,082 |  |  |  |  | 195,959 |  |  |
Mortgage loan (13) |  | 8 | hotels |  | February 2024 |  | SOFR(4) + | 3.28 | % |  | n/a |  | 345,000 |  |  |  |  | 395,000 |  |  |
Mortgage loan (14) |  | 2 | hotels |  | March 2024 |  | SOFR(4) + | 2.80 | % |  | n/a |  | 240,000 |  |  |  |  | 240,000 |  |  |
Mortgage loan (15) |  | 19 | hotels |  | April 2024 |  | SOFR(4) + | 3.51 | % |  | n/a |  | 862,027 |  |  |  |  | 907,030 |  |  |
Mortgage loan |  | 1 | hotel |  | May 2024 |  |  | 4.99 | % |  | n/a |  | 5,652 |  |  |  |  | 5,819 |  |  |
Mortgage loan (16) |  | 1 | hotel |  | June 2024 |  | SOFR(4) + | 2.00 | % |  | n/a |  | 8,881 |  |  |  |  | 8,881 |  |  |
Mortgage loan (17) |  | 5 | hotels |  | June 2024 |  | SOFR(4) + | 3.90 | % |  | n/a |  | 158,689 |  |  |  |  | 221,040 |  |  |
Mortgage loan (18) |  | 5 | hotels |  | June 2024 |  | SOFR(4) + | 4.17 | % |  | n/a |  | 237,061 |  |  |  |  | 262,640 |  |  |
Mortgage loan (19) |  | 5 | hotels |  | June 2024 |  | SOFR(4) + | 2.90 | % |  | n/a |  | 119,003 |  |  |  |  | 160,000 |  |  |
Mortgage loan |  | 2 | hotels |  | August 2024 |  |  | 4.85 | % |  | n/a |  | 10,986 |  |  |  |  | 11,172 |  |  |
Mortgage loan |  | 3 | hotels |  | August 2024 |  |  | 4.90 | % |  | n/a |  | 22,024 |  |  |  |  | 22,349 |  |  |
Mortgage loan (20) |  | 1 | hotel |  | November 2024 |  | LIBOR(3) + | 4.65 | % |  | n/a |  | — |  |  |  |  | 85,552 |  |  |
Mortgage loan (20) |  | 1 | hotel |  | November 2024 |  | SOFR(4) + | 4.76 | % |  | n/a |  | 86,000 |  |  |  |  | — |  |  |
Mortgage loan (21) |  | 1 | hotel |  | December 2024 |  | SOFR(4) + | 4.00 | % |  | n/a |  | 37,000 |  |  |  |  | 37,000 |  |  |
Mortgage loan |  | 3 | hotels |  | February 2025 |  |  | 4.45 | % |  | n/a |  | 45,999 |  |  |  |  | 46,918 |  |  |
Mortgage loan |  | 1 | hotel |  | March 2025 |  |  | 4.66 | % |  | n/a |  | 22,892 |  |  |  |  | 23,326 |  |  |
Mortgage loan (22) |  | 1 | hotel |  | August 2025 |  | SOFR(4) + | 3.91 | % |  | n/a |  | 98,000 |  |  |  |  | 98,000 |  |  |
Mortgage loan (5) |  | 2 | hotels |  | May 2026 |  | SOFR(4) + | 4.00 | % |  | n/a |  | 98,450 |  |  |  |  | — |  |  |
|  |  |  |  |  |  |  |  |  |  |  | 3,591,235 |  |  |  |  | 3,835,272 |  |  |
Bridge loan (23) (26) |  | 1 | hotel |  | November 2023 |  |  | 5.00% |  | n/a |  | 19,889 |  |  |  |  | — |  |  |
Environmental loan (26) |  | 1 | hotel |  | April 2024 |  |  | 10.00% |  | n/a |  | 571 |  |  |  |  | — |  |  |
TIF loan (24) (26) |  | 1 | hotel |  | August 2025 |  |  | 8.25% |  | n/a |  | 5,609 |  |  |  |  | — |  |  |
Construction loan (25) (26) |  | 1 | hotel |  | May 2033 |  | SOFR(4) + | 8.50% |  | n/a |  | 12,622 |  |  |  |  | — |  |  |
|  |  |  |  |  |  |  |  |  |  |  | 38,691 |  |  |  |  | — |  |  |
Total indebtedness |  |  |  |  |  |  |  |  |  |  |  | 3,629,926 |  |  |  |  | 3,835,272 |  |  |
Premiums (discounts), net |  |  |  |  |  |  |  |  |  |  |  | (5,667) |  |  |  |  | (20,249) |  |  |
Capitalized default interest and late charges |  |  |  |  |  |  |  |  |  |  |  | 1,757 |  |  |  |  | 8,363 |  |  |
Deferred loan costs, net |  |  |  |  |  |  |  |  |  |  |  | (8,146) |  |  |  |  | (8,530) |  |  |
Embedded debt derivative |  |  |  |  |  |  |  |  |  |  |  | 23,096 |  |  |  |  | 23,687 |  |  |
Indebtedness, net |  |  |  |  |  |  |  |  |  |  |  | $ | 3,640,966 |  |  |  |  | $ | 3,838,543 |  |  |
Indebtedness related to assets held for sale, net (10) |  | 1 | hotel |  | June 2024 |  | SOFR(4) + | 3.90% |  | n/a |  | 9,247 |  |  |  |  | — |  |  |
|  |  |  |  |  |  |  |  |  |  |  | $ | 3,631,719 |  |  |  |  | $ | 3,838,543 |  |  |

_____________________________
(1) Interest rates do not include default or late payment rates in effect on some mortgage loans.
(2) Default rates are presented for mortgage loans which were in default, in accordance with the terms and conditions of the applicable mortgage agreement, as of September 30, 2023. The default rate is accrued in addition to the stated interest rate.
(3) LIBOR rate was 4.392% December 31, 2022.
(4) SOFR rates were 5.320% and 4.358% at September 30, 2023 and December 31, 2022, respectively.
18

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
(5) On May 19, 2023, we refinanced this mortgage loan with a new $98.5 million mortgage loan with a three-year initial term and two one-year extension options, subject to satisfaction of certain conditions. The new mortgage loan is interest only and bears interest at a rate of SOFR + 4.00% and has a SOFR floor of 0.50%.
(6) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The third one-year extension period ended in June 2022. The paydown that was required in order to exercise the fourth one-year extension option was not made. As a result, effective June 9, 2023, this mortgage loan was in default under the terms and conditions of the mortgage loan agreement. Default interest has been accrued, in accordance with the terms of the mortgage loan agreement, and is reflected in the Company’s consolidated balance sheet and statement of operations. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 3.65% to SOFR + 3.70%.
(7) This loan has five one-year extension options, subject to satisfaction of certain conditions. The third one-year extension period began in June 2022. The paydown that was required in order to exercise the fourth one-year extension option was not made. As a result, effective June 9, 2023, this mortgage loan was in default under the terms and conditions of the mortgage loan agreement. Default interest has been accrued, in accordance with the terms of the mortgage loan agreement, and is reflected in the Company’s consolidated balance sheet and statement of operations. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 3.39% to SOFR + 3.44%.
(8) This loan has five one-year extension options, subject to satisfaction of certain conditions. The third one-year extension period began in June 2022. The paydown that was required in order to exercise the fourth one-year extension option was not made. As a result, effective June 9, 2023, this mortgage loan was in default under the terms and conditions of the mortgage loan agreement. Default interest has been accrued, in accordance with the terms of the mortgage loan agreement, and is reflected in the Company’s consolidated balance sheet and statement of operations. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 3.68% to SOFR + 3.73%.
(9) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fourth one-year extension period began in November 2022. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 3.13% to SOFR + 3.26%. On July 14, 2023, we repaid $5.3 million of principal on this mortgage loan.
(10) A portion of this mortgage loan at September 30, 2023 relates to the Bucks County Sheraton. See note 5.
(11) This loan has two one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in December 2022.
(12) This term loan has two one-year extension options, subject to satisfaction of certain conditions. Effective January 15, 2023, the interest rate decreased from 16% to 14% in accordance with the terms and conditions of the loan agreement. On August 1, 2023, we repaid $12.9 million of principal on this term loan.
(13) On February 9, 2023, we amended this mortgage loan. Terms of the amendment included a principal paydown of $50.0 million, and the variable interest rate changed from LIBOR + 3.07% to LIBOR + 3.17%. This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fourth one-year extension period began in February 2023. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 3.17% to SOFR + 3.28%.
(14) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The third one-year extension period began in March 2023. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 2.75% to SOFR + 2.80%.
(15) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fourth one-year extension period began in April 2023. In accordance with exercising the fourth one-year extension option, we repaid $45.0 million of principal and the variable interest rate changed from LIBOR + 3.20% to LIBOR + 3.47%. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 3.47% to SOFR + 3.51%.
(16) This mortgage loan has a SOFR floor of 2.00%.
(17) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fourth one-year extension period began effective June 2023. In accordance with exercising the extension option, we repaid $62.4 million of principal and the variable interest rate changed from LIBOR + 3.73% to LIBOR + 3.86%. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 3.86% to SOFR + 3.90%.
(18) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fourth one-year extension period began in June 2023. In accordance with exercising the extension option, the interest rate changed from LIBOR + 4.02% to LIBOR + 4.15%. On July 5, 2023, we repaid $25.6 million of principal, reducing the outstanding principal balance to $237.1 million, in accordance with exercising the fourth extension option. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 4.15% to SOFR + 4.17%.
(19) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fourth one-year extension period began effective June 2023. In accordance with exercising the extension option, the interest rate changed from LIBOR + 2.73% to LIBOR + 2.85%. On July 7, 2023, we repaid $41.0 million of principal, reducing the outstanding principal balance to $119.0 million, in accordance with exercising the fourth extension option. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate changed from LIBOR + 2.85% to SOFR + 2.90%.
(20) On January 27, 2023, we drew the remaining $449,000 of the $2.0 million additional funding available to replenish restricted cash balances in accordance with the terms of the mortgage loan. Effective June 30, 2023, we replaced the variable interest rate of LIBOR + 4.65% with SOFR + 4.76% in accordance with the terms and conditions of the loan agreement. This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions.
(21) This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions. This mortgage loan has a SOFR floor of 0.50%.
(22) This mortgage loan has one one-year extension option, subject to satisfaction of certain conditions.
(23) This loan has one six-month extension option, subject to satisfaction of certain conditions.
(24) On July 26, 2023, we amended this loan. Terms of the amendment included increasing the fixed rate of 4.75% to a fixed rate of 8.25%, and extending the maturity date from July 2024 to August 2025.
(25) Effective August 1, 2023, we amended this construction loan. Terms of the amendment included replacing the variable interest rate of LIBOR + 8.39% with SOFR + 8.50% and extending the term loan effective date from August 2023 to January 2024. Additionally, the term loan rate of a fixed rate of 6.81% plus the higher of the a) five-year swap rate and b) 0.94% was replaced with a fixed rate of 7.75% plus SOFR, less 1.85%. The final maturity date is May 2033.
(26) This loan is associated with 815 Commerce Managing Member, LLC. See discussion in notes 2, 4 and 8.
19

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We recognized net premium (discount) amortization as presented in the table below (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Line Item |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Interest expense and amortization of discounts and loan costs |  | $ | (5,031) |  |  | $ | (3,108) |  |  | $ | (13,862) |  |  | $ | (8,719) |  |  |

The amortization of the net premium (discount) is computed using a method that approximates the effective interest method.
During the years ended December 31, 2021 and 2020 the Company entered into forbearance and other agreements which were evaluated to be considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges. As a result of the troubled debt restructurings all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loan using the effective interest method. The amount of the capitalized principal that was amortized during the three and nine months ended September 30, 2023 and 2022, was $1.7 million and $6.6 million, and $3.8 million and $11.4 million, respectively. These amounts are included as a reduction to “interest expense and amortization of discounts and loan costs” in the consolidated statements of operations.
On June 21, 2023, the Company and Ashford Hospitality Limited Partnership (the “Borrower”), an indirect subsidiary of the Company, entered into Amendment No. 2 to the Credit Agreement (“Amendment No. 2”) with certain funds and accounts managed by Oaktree Capital Management, L.P. (the “Lenders”) and Oaktree Fund Administration, LLC. Amendment No. 2, subject to the conditions set forth therein, provides that, among other things:
(i) the Delayed Draw Term Loan (“DDTL”) commitment expiration date will be July 7, 2023, or such earlier date that the Borrower makes an Initial DDTL draw to be used by the Borrower to prepay certain mortgage indebtedness;
(ii) notwithstanding the occurrence of the DDTL commitment expiration date, up to $100,000,000 of Initial DDTLs will be made available by the Lenders for a period of twelve (12) months ending July 7, 2024, subject to the Borrower paying an unused fee of 9% per annum on the undrawn amount;
(iii) Ashford Trust and the Borrower will be permitted to make certain restricted payments, including without limitation dividends on Ashford Trust’s preferred stock, without having to maintain unrestricted cash in an amount not less than the sum of (x) $100,000,000 plus (y) the aggregate principal amount of DDTLs advanced prior to the date thereof or contemporaneously therewith;
(iv) a default on certain pool mortgage loans will not be counted against the $400,000,000 mortgage debt threshold amount;
(v) for purposes of the mortgage debt threshold amount, a certain mortgage loan, with a current aggregate principal amount of $415,000,000, will be deemed to have a principal amount of $400,000,000; and
(vi) when payable by the Borrower under the Credit Agreement, at least 50% of the exit fee shall be paid as a cash exit fee.
20

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The KEYS mortgage loans were entered into on June 13, 2018, each of which had a two-year initial term and five one-year extension options. In order to qualify for a one-year extension in June of 2023, each KEYS loan pool was required to achieve a certain debt yield test. The Company extended its KEYS Pool C loan with a paydown of approximately $62.4 million, its KEYS Pool D loan with a paydown of approximately $25.6 million, and its KEYS Pool E loan with a paydown of approximately $41.0 million. On June 9, 2023 the Company received a 30-day extension to satisfy the extension conditions in order to negotiate modifications to the respective extension tests. On July 7, 2023, the Company elected not to make the required paydowns to extend its KEYS Pool A loan ($180.7 million debt balance with a book value of collateral of $122.8 million), KEYS Pool B loan ($174.4 million debt balance with a book value of collateral of $115.1 million) and KEYS Pool F loan ($215.1 million debt balance with a book value of collateral of $157.6 million) as of September 30, 2023, thereby defaulting on such loans. Below is a summary of the hotel properties securing the KEYS mortgage loans:
KEYS A Loan Pool
Courtyard Columbus Tipton Lakes – Columbus, IN
Courtyard Old Town – Scottsdale, AZ
Residence Inn Hughes Center – Las Vegas, NV
Residence Inn Phoenix Airport – Phoenix, AZ
Residence Inn San Jose Newark – Newark, CA
SpringHill Suites Manhattan Beach – Hawthorne, CA
SpringHill Suites Plymouth Meeting – Plymouth Meeting, PA
KEYS B Loan Pool
Courtyard Basking Ridge – Basking Ridge, NJ
Courtyard Newark Silicon Valley – Newark, CA
Courtyard Oakland Airport – Oakland, CA
Courtyard Plano Legacy Park – Plano, TX
Residence Inn Plano – Plano, TX
SpringHill Suites BWI Airport – Baltimore, MD
TownePlace Suites Manhattan Beach – Hawthorne, CA
KEYS C Loan Pool
Hyatt Coral Gables – Coral Gables, FL
Hilton Ft. Worth – Fort Worth, TX
Hilton Minneapolis Airport – Bloomington, MN
Sheraton San Diego – San Diego, CA
Sheraton Bucks County, PA – Langhorne, PA
KEYS D Loan Pool
Marriott Beverly Hills – Los Angeles, CA
One Ocean Resort – Atlantic Beach, FL
Marriott Suites Dallas – Dallas, TX
Hilton Santa Fe – Santa Fe, NM
Embassy Suites Dulles – Herndon, VA
KEYS E Loan Pool
Marriott Fremont – Fremont, CA
Embassy Suites Philadelphia – Philadelphia, PA
Marriott Memphis – Memphis, TN
Sheraton Anchorage – Anchorage, AK
Lakeway Resort Austin – Lakeway, TX
KEYS F Loan Pool
Embassy Suites Flagstaff – Flagstaff, AZ
Embassy Suites Walnut Creek – Walnut Creek, CA
Marriott Bridgewater – Bridgewater, NJ
Marriott Research Triangle Park – Durham, NC
W Atlanta Downtown – Atlanta, GA
21

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We have extension options relating to certain property-level loans that will permit us to extend the maturity date of our loans if certain conditions are satisfied at the respective extension dates, including the achievement of debt yield targets required in order to extend such loans. To the extent we decide to extend the maturity date of the debt outstanding under the loans, we may be required to prepay a significant amount of the loans in order to meet the required debt yield targets.
Effective June 30, 2023, LIBOR is no longer published. Accordingly all variable interest rate mortgage loans held by the Company that used the LIBOR index transitioned to SOFR beginning on July 1, 2023. Not all lenders will execute loan amendment documents and instead will defer to original loan documents that dictate changes in index rates.
If we violate covenants in our debt agreements, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. As of September 30, 2023, we were in compliance with all covenants related to mortgage loans, with the exception of the KEYS Pools A, KEYS Pool B and KEYS Pool F mortgage loans discussed above. We were also in compliance with all covenants under the senior secured term loan facility with Oaktree Capital Management L.P. (“Oaktree”). The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of Ashford Trust or Ashford Trust OP, our operating partnership, and the liabilities of such subsidiaries do not constitute the obligations of Ashford Trust or Ashford Trust OP.
In conjunction with the development of the Le Meridien in Fort Worth, Texas, which was consolidated as of May 31, 2023, the Company recorded $1.0 million and $1.6 million of capitalized interest during the three and nine months ended September 30, 2023, which is included in “investment in hotel properties, net” in our consolidated balance sheets. The total amount of capitalized interest on the development was $7.0 million as of September 30, 2023. See note 4.
8. Notes Receivable, Net and Other
Notes receivable, net are summarized in the table below (dollars in thousands):

| Interest Rate |  | September 30, 2023 |  | December 31, 2022
Certificate of Occupancy Note (1) (3) |  |  |  |  |
Face amount | 7.0 | % |  | $ | — |  |  | $ | 5,250 |
Discount (2) |  |  | — |  |  | (188) |
Notes receivable, net |  |  | $ | — |  |  | $ | 5,062 |

____________________________________
(1) The outstanding principal balance and all accrued and unpaid interest was due and payable on or before July 9, 2025. The note was paid in full on July 14, 2023.
(2) The discount represented the imputed interest during the interest-free period.
(3) The note receivable was secured by the 1.65-acre land parcel adjacent to the Hilton St. Petersburg Bayfront.
No cash interest income was recorded for the three and nine months ended September 30, 2023 and 2022.
We recognized discount amortization income as presented in the table below (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Line Item |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Other income (expense) |  | $ | 9 |  |  | $ | 86 |  |  | $ | 188 |  |  | $ | 252 |  |  |

As of September 30, 2023, the Company has a note receivable with the manager of 815 Commerce MM who also holds a non-controlling interest in 815 Commerce MM for $5.7 million. See discussion in note 2. The Company has a maximum note commitment of up to $9.5 million, which is the total of balancing deposits required by the property construction lender. The note bears interest at 18.0% per annum. The note receivable is payable within 30 days after demand. If the manager fails upon demand to repay the note receivable with interest, the Company will have the right to convert the unpaid principal plus all accrued interest thereon to an additional capital contribution in which case the deemed additional capital contributions by the manager will be deemed to have not occurred and the percentage interests and the residual sharing percentages of the members shall be adjusted. The note receivable may be prepaid in whole or in part.
22

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes the note receivable (dollars in thousands):

| Interest Rate |  | September 30, 2023 |  | December 31, 2022
Note receivable | 18.0 | % |  | $ | 5,721 |  |  | $ | — |

The following table summarizes the interest income associated with the note receivable (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |  |  |
Line Item |  | 2023 |  |  |  | 2023 |  |  |  |
Other income (expense) |  | $ | 192 |  |  |  |  | $ | 212 |  |  |  |  |

On September 1, 2022, the Company sold the Sheraton Ann Arbor. See note 5. Under the purchase and sale agreement, $1.5 million of the sales price is deferred, interest free, until the last day of the 24th month following the closing date (September 30, 2024). The components of the receivable, which is included in “other assets” in the consolidated balance sheet, are summarized below (dollars in thousands):

| Imputed Interest Rate |  | September 30, 2023 |  | December 31, 2022 |  |
Deferred Consideration |  |  |  |  |  |  |
Face amount | 10.0 | % |  | $ | 1,500 |  |  | $ | 1,500 |  |  |
Discount (1) |  |  | (142) |  |  | (240) |  |  |
|  |  | $ | 1,358 |  |  | $ | 1,260 |  |  |

_______________
(1) The discount represents the imputed interest during the interest-free period.
We recognized discount amortization income as presented in the table below (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Line Item |  | 2023 |  |  |  | 2022 |  | 2023 |  | 2022 |  |
Other income (expense) |  | $ | 34 |  |  |  |  | $ | 10 |  |  | $ | 98 |  |  | $ | 10 |  |  |

We review receivables for impairment each reporting period. Under the model, the Company estimates credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument and is required to record a credit loss expense (or reversal) in each reporting period. Our assessment of impairment is based on considerable management judgment and assumptions. No impairment charges were recorded for the three and nine months ended September 30, 2023 and 2022.
9. Derivative Instruments and Hedging
Interest Rate Derivatives—We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage these risks, we primarily use interest rate derivatives to hedge our debt and our cash flows, which include interest rate caps. To mitigate nonperformance risk, we routinely use a third party’s analysis of the creditworthiness of the counterparties, which supports our belief that the counterparties’ nonperformance risk is limited. All derivatives are recorded at fair value. Payments from counterparties on in-the-money interest rate caps are recognized as realized gains on our consolidated statements of operations.
23

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table presents a summary of our interest rate derivatives entered into over each applicable period:

| Nine Months Ended September 30, |  |  |
| 2023 |  | 2022 |  |  |
Interest rate caps: |  |  |  |  |  |
Notional amount (in thousands) | $ | 2,158,231 |  | (1) | $ | 2,873,651 |  | (1) |  |
Strike rate low end of range | 2.50 | % |  | 3.00 | % |  |  |
Strike rate high end of range | 6.90 | % |  | 4.00 | % |  |  |
Effective date range | March 2023 - August 2023 |  | January 2022 - June 2022 |  |  |
Termination date range | February 2024 - June 2025 |  | January 2023 - July 2023 |  |  |
Total cost (in thousands) | $ | 22,285 |  |  | $ | 5,255 |  |  |  |

_______________
(1)These instruments were not designated as cash flow hedges.
We held interest rate instruments as summarized in the table below:

| September 30, 2023 |  | December 31, 2022 |
Interest rate caps: |  |  |  |
Notional amount (in thousands) | $ | 4,081,521 |  | (1) | $ | 3,549,941 |  | (1)
Strike rate low end of range | 2.00 | % |  | 2.00 | % |
Strike rate high end of range | 6.90 | % |  | 5.50 | % |
Termination date range | November 2023 - June 2025 |  | January 2023 - January 2025 |
Aggregate principal balance on corresponding mortgage loans (in thousands) | $ | 2,706,155 |  |  | $ | 3,505,242 |  |

_______________
(1)These instruments were not designated as cash flow hedges.
Compound Embedded Debt Derivative—Based on certain provisions in the Oaktree Credit Agreement, the Company is required to pay an exit fee. Under the applicable accounting guidance, the exit fee is considered an embedded derivative liability that meets the criteria for bifurcation from the debt host. There were other features that were bifurcated, but did not have a material value. The embedded debt derivative was initially measured at fair value and the fair value of the embedded debt derivative is estimated at each reporting period. See note 10.
10. Fair Value Measurements
Fair Value Hierarchy—For disclosure purposes, financial instruments, whether measured at fair value on a recurring or nonrecurring basis or not measured at fair value, are classified in a hierarchy consisting of three levels based on the observability of valuation inputs in the marketplace as discussed below:
•Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally are obtained from exchange or dealer markets.
•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.
The fair value of interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rose above the strike rates of the caps. Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (SOFR forward curves) and volatilities (Level 2 inputs). We also incorporate credit
24

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
valuation adjustments (Level 3 inputs) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.
When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at September 30, 2023, the SOFR interest rate forward curve (Level 2 inputs) assumed a downtrend from 5.320% to 4.220% for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values of derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.
The Company initially recorded an embedded debt derivative of $43.7 million, which was attributed to the compound embedded derivative liability associated with the Oaktree term loan.
The compound embedded derivative liability is considered a Level 3 measurement due to the utilization of significant unobservable inputs in the valuation, which were based on ‘with and without’ valuation models. Based on the terms and provisions of the Oaktree Credit Agreement, with the assistance of a valuation specialist, the Company utilized a risk neutral model to estimate the fair value of the embedded derivative features requiring bifurcation as of the respective issuance dates and as of the September 30, 2023 reporting date. The risk neutral model is designed to utilize market data and the Company’s best estimate of the timing and likelihood of the settlement events that are related to the embedded derivative features in order to estimate the fair value of the respective notes with these embedded derivative features.
The fair value of the notes with the derivative features is compared to the fair value of a plain vanilla note (excluding the derivative features), which is calculated based on the present value of the future default adjusted expected cash flows. The difference between the two values represents the fair value of the bifurcated derivative features as of each respective valuation date.
The key inputs to the valuation models that were utilized to estimate the fair value of the embedded debt derivative are described as follows:
•the default probability-weighted exit fee and prepayment cash flows are based on the contractual terms of the Oaktree Credit Agreement and the expectation of an acceleration event, including default, of the Company;
•the remaining term was determined based on the expected remaining term of the related note with embedded features subject to valuation (as of the respective valuation date);
•the Company’s equity volatility estimate was based on the historical equity volatility of the Company, based on the remaining expected term of the respective loans;
•the risk-free rate was the discount rate utilized in the valuation and was determined based on reference to market yields for U.S. treasury debt instruments with similar terms;
•the recovery rate assumed upon occurrence of a default event was estimated based upon recovery rate data published by credit rating agencies specific to the seniority of the notes; and
•the probabilities and timing of a default-related acceleration event were estimated using an annualized probability of default which was implied from the debt issuance proceeds as of the issuance date, and updated utilizing relevant market data including market observed option-adjusted spreads as of September 30, 2023.
25

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table includes a summary of the compound embedded derivative liabilities measured at fair value using significant unobservable (Level 3) inputs (in thousands):

|  | Fair Value
Balance at December 31, 2021 |  | $ | 27,906 |
Re-measurement of fair value |  | (932) |
Balance at March 31, 2022 |  | 26,974 |
Re-measurement of fair value |  | (2,977) |
Balance at June 30, 2022 |  | 23,997 |
Re-measurement of fair value |  | (719) |
Balance at September 30, 2022 |  | 23,278 |
Re-measurement of fair value |  | 409 |
Balance at December 31, 2022 |  | 23,687 |
Re-measurement of fair value |  | 934 |
Balance at March 31, 2023 |  | 24,621 |
Re-measurement of fair value |  | (1,961) |
Balance at June 30, 2023 |  | 22,660 |
Re-measurement of fair value |  | 436 |
Balance at September 30, 2023 |  | $ | 23,096 |

Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):

| Quoted Market Prices (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  |  |  | Total |
September 30, 2023: |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | — |  |  | $ | 25,493 |  |  | $ | — |  |  |  |  | $ | 25,493 |  | (1)
Total | $ | — |  |  | $ | 25,493 |  |  | $ | — |  |  |  |  | $ | 25,493 |  |
Liabilities |  |  |  |  |  |  |  |  |  |
Embedded debt derivative | $ | — |  |  | $ | — |  |  | $ | (23,096) |  |  |  |  | $ | (23,096) |  | (2)
Net | $ | — |  |  | $ | 25,493 |  |  | $ | (23,096) |  |  |  |  | $ | 2,397 |  |
December 31, 2022: |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | — |  |  | $ | 47,182 |  |  | $ | — |  |  |  |  | $ | 47,182 |  | (1)
Total | $ | — |  |  | $ | 47,182 |  |  | $ | — |  |  |  |  | $ | 47,182 |  |
Liabilities |  |  |  |  |  |  |  |  |  |
Embedded debt derivative | $ | — |  |  | $ | — |  |  | $ | (23,687) |  |  |  |  | $ | (23,687) |  | (2)
Net | $ | — |  |  | $ | 47,182 |  |  | $ | (23,687) |  |  |  |  | $ | 23,495 |  |

____________________________________
(1) Reported net as “derivative assets” in our consolidated balance sheets.
(2) Reported in “indebtedness, net” in our consolidated balance sheets.
26

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Effect of Fair Value Measured Assets and Liabilities on Condensed Consolidated Statements of Operations
The following table summarizes the effect of fair value measured assets and liabilities on our consolidated statements of operations (in thousands):

| Gain (Loss) Recognized in Income |  |  |  |
| Three Months Ended September 30, |  |  |  |
| 2023 |  | 2022 |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | (2,242) |  |  | $ | 9,055 |  | (3) |  |  |  |  |  |  |
Total | $ | (2,242) |  |  | $ | 9,055 |  |  |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |
Embedded debt derivative | $ | (436) |  |  | $ | 719 |  |  |  |  |  |  |  |  |
Net | $ | (2,678) |  |  | $ | 9,774 |  |  |  |  |  |  |  |  |
Total combined |  |  |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | (12,567) |  |  | $ | 9,055 |  |  |  |  |  |  |  |  |
Embedded debt derivative | (436) |  |  | 719 |  |  |  |  |  |  |  |  |
Unrealized gain (loss) on derivatives | (13,003) |  | (1) | 9,774 |  | (1) |  |  |  |  |  |  |
Realized gain (loss) on interest rate caps | 10,325 |  | (1) (2) | — |  |  |  |  |  |  |  |  |
Net | $ | (2,678) |  |  | $ | 9,774 |  |  |  |  |  |  |  |  |

____________________________________
(1) Reported as “realized and unrealized gain (loss) on derivatives” in our consolidated statements of operations.
(2) Represents settled and unsettled payments from counterparties on interest rate caps.
(3) Amount excludes income of $133,000 associated with payments received from counterparties on interest rate caps, which is included in other income (expense) in our consolidated statements of operations.

| Gain (Loss) Recognized in Income |  |  |  |  |  |  |  |
| Nine Months Ended September 30, |  |  |  |  |  |  |  |
| 2023 |  | 2022 |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | 3,899 |  |  | $ | 14,431 |  | (3) |  |  |  |  |  |  |
Total | $ | 3,899 |  |  | $ | 14,431 |  |  |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |
Embedded debt derivative | $ | 591 |  |  | $ | 4,628 |  |  |  |  |  |  |  |  |
Net | $ | 4,490 |  |  | $ | 19,059 |  |  |  |  |  |  |  |  |
Total combined |  |  |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | (26,891) |  |  | $ | 14,431 |  |  |  |  |  |  |  |  |
Embedded debt derivative | 591 |  |  | 4,628 |  |  |  |  |  |  |  |  |
Unrealized gain (loss) on derivatives | (26,300) |  | (1) | 19,059 |  | (1) |  |  |  |  |  |  |
Realized gain (loss) on interest rate caps | 30,790 |  | (1) (2) | — |  |  |  |  |  |  |  |  |
Net | $ | 4,490 |  |  | $ | 19,059 |  |  |  |  |  |  |  |  |

____________________________________
(1) Reported as “realized and unrealized gain (loss) on derivatives” in our consolidated statements of operations.
(2) Represents settled and unsettled payments from counterparties on interest rate caps.
(3) Amount excludes income of $133,000 associated with payments received from counterparties on interest rate caps, which is included in other income (expense) in our consolidated statements of operations.
27

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
11. Summary of Fair Value of Financial Instruments
Determining estimated fair values of our financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. Market assumptions and/or estimation methodologies used may have a material effect on estimated fair value amounts. Accordingly, estimates presented are not necessarily indicative of amounts at which these instruments could be purchased, sold, or settled. Carrying amounts and estimated fair values of financial instruments, for periods indicated, were as follows (in thousands):

| September 30, 2023 |  | December 31, 2022
| Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
Financial assets measured at fair value: |  |  |  |  |  |  |
Derivative assets | $ | 25,493 |  |  | $ | 25,493 |  |  | $ | 47,182 |  |  | $ | 47,182 |
Financial liabilities measured at fair value: |  |  |  |  |  |  |
Embedded debt derivative | $ | 23,096 |  |  | $ | 23,096 |  |  | $ | 23,687 |  |  | $ | 23,687 |
Financial assets not measured at fair value: |  |  |  |  |  |  |
Cash and cash equivalents (1) | $ | 184,737 |  |  | $ | 184,737 |  |  | $ | 417,064 |  |  | $ | 417,064 |
Restricted cash (1) | 172,182 |  |  | 172,182 |  |  | 141,962 |  |  | 141,962 |
Accounts receivable, net (1) | 73,940 |  |  | 73,940 |  |  | 49,809 |  |  | 49,809 |
Notes receivable, net | 5,934 |  |  | 5,637 to 6,230 |  | 5,062 |  |  | 4,809 to 5,315
Due from Ashford Inc., net | — |  |  | — |  |  | 486 |  |  | 486 |
Due from related parties, net (1) | 4,404 |  |  | 4,404 |  |  | 6,570 |  |  | 6,570 |
Due from third-party hotel managers | 24,145 |  |  | 24,145 |  |  | 22,462 |  |  | 22,462 |
Financial liabilities not measured at fair value: |  |  |  |  |  |  |
Indebtedness (1) | $ | 3,624,259 |  |  | $3,329,331 to $3,679,785 |  | $ | 3,815,023 |  |  | $3,500,635 to $3,869,122
Accounts payable and accrued expenses (1) | 153,719 |  |  | 153,719 |  |  | 115,970 |  |  | 115,970 |
Accrued interest payable (1) | 25,281 |  |  | 25,281 |  |  | 15,287 |  |  | 15,287 |
Dividends and distributions payable | 3,568 |  |  | 3,568 |  |  | 3,118 |  |  | 3,118 |
Due to Ashford Inc., net (1) | 9,019 |  |  | 9,019 |  |  | — |  |  | — |
Due to third-party hotel managers | 1,134 |  |  | 1,134 |  |  | 1,319 |  |  | 1,319 |

____________________________________
(1) Includes balances associated with assets held for sale and liabilities associated with assets held for sale as of September 30, 2023.
Cash, cash equivalents and restricted cash. These financial assets bear interest at market rates and have original maturities of less than 90 days. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.
Accounts receivable, net, accounts payable and accrued expenses, accrued interest payable, dividends and distributions payable, due to/from related parties, net, due to/from Ashford Inc., net and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to their short-term nature. This is considered a Level 1 valuation technique.
Notes receivable, net. The carrying amount of notes receivable, net approximates its fair value. We estimate the fair value of the notes receivable, net to be approximately 95.0% and 105.0% of the carrying value of $5.9 million at September 30, 2023 and approximately 95.0% to 105.0% of the carrying value of $5.1 million at December 31, 2022. This is considered a Level 2 valuation technique.
Derivative assets and embedded debt derivative. See notes 9 and 10 for a complete description of the methodology and assumptions utilized in determining fair values.
Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. Current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied and adjusted for credit spreads. Credit spreads take into consideration general market conditions, maturity, and collateral. We estimated the fair value of total indebtedness to be approximately 91.9% to 101.5% of the carrying value of $3.6 billion at September 30, 2023 and approximately 91.8% to 101.4% of the carrying value of $3.8 billion at December 31, 2022. These fair value estimates are considered a Level 2 valuation technique.
28

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
12. Income (Loss) Per Share
Basic income (loss) per common share is calculated using the two-class method by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per common share is calculated using the two-class method, or treasury stock method if more dilutive, and reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share.
The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per-share amounts):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Income (loss) allocated to common stockholders - basic and diluted: |  |  |  |  |  |  |  |  |
Income (loss) attributable to the Company | $ | (63,562) |  |  | $ | (22,092) |  |  | $ | (149,092) |  |  | $ | (83,692) |  |  |
Less: dividends on preferred stock | (4,295) |  |  | (3,104) |  |  | (11,290) |  |  | (9,311) |  |  |
Less: deemed dividends on redeemable preferred stock | (760) |  |  | — |  |  | (1,993) |  |  | — |  |  |
Distributed and undistributed income (loss) allocated to common stockholders - basic and diluted | $ | (68,617) |  |  | $ | (25,196) |  |  | $ | (162,375) |  |  | $ | (93,003) |  |  |
Weighted average common shares outstanding: |  |  |  |  |  |  |  |  |
Weighted average shares outstanding - basic and diluted | 34,459 |  |  | 34,371 |  |  | 34,395 |  |  | 34,324 |  |  |
Basic income (loss) per share: |  |  |  |  |  |  |  |  |
Net income (loss) allocated to common stockholders per share | $ | (1.99) |  |  | $ | (0.73) |  |  | $ | (4.72) |  |  | $ | (2.71) |  |  |
Diluted income (loss) per share: |  |  |  |  |  |  |  |  |
Net income (loss) allocated to common stockholders per share | $ | (1.99) |  |  | $ | (0.73) |  |  | $ | (4.72) |  |  | $ | (2.71) |  |  |

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect adjustments for the following items (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Income (loss) allocated to common stockholders is not adjusted for: |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) attributable to redeemable noncontrolling interests in operating partnership |  | $ | (889) |  |  | $ | (231) |  |  | $ | (1,838) |  |  | $ | (679) |  |  |  |  |
Dividends on preferred stock - Series J (inclusive of deemed dividends) |  | 1,843 |  |  | — |  |  | 3,776 |  |  | — |  |  |  |  |
Dividends on preferred stock - Series K (inclusive of deemed dividends) |  | 108 |  |  | — |  |  | 196 |  |  | — |  |  |  |  |
Total |  | $ | 1,062 |  |  | $ | (231) |  |  | $ | 2,134 |  |  | $ | (679) |  |  |  |  |
Weighted average diluted shares are not adjusted for: |  |  |  |  |  |  |  |  |  |  |  |
Effect of assumed conversion of operating partnership units |  | 447 |  |  | 317 |  |  | 394 |  |  | 278 |  |  |  |  |
Effect of assumed issuance of shares for term loan exit fee |  | 1,745 |  |  | 1,745 |  |  | 1,745 |  |  | 1,745 |  |  |  |  |
Effect of assumed conversion of preferred stock - Series J |  | 21,712 |  |  | — |  |  | 9,978 |  |  | — |  |  |  |  |
Effect of assumed conversion of preferred stock - Series K |  | 1,135 |  |  | — |  |  | 514 |  |  | — |  |  |  |  |
Total |  | 25,039 |  |  | 2,062 |  |  | 12,631 |  |  | 2,023 |  |  |  |  |

13. 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
29

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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 of three years. Additionally, certain independent members of the board of directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant. Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election, settled in our common stock. An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of 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.
In March 2023, the Company granted approximately 282,000 Performance LTIP units, representing 250% of the target, and a vesting period of approximately three years. During the second quarter, the Company’s stockholders approved an increase to the incentive stock plan, which is sufficient to cover the expected settlements. The 2023 awards, which were originally classified as liability awards, are now classified as equity awards, within temporary equity, which resulted in a remeasurement of the award at a new fair value of $4.93 per share.
With respect to the 2021, 2022 and 2023 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 applicable measurement 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 September 30, 2023, there were approximately 1.6 million Performance LTIP units outstanding, representing 250% of the target number granted for the 2021, 2022 and 2023 grants.
In May 2023, approximately 112,000 LTIP units were issued to independent directors with a fair value of approximately $475,000, which vested immediately upon grant and have been expensed during the nine months ended September 30, 2023.
As of September 30, 2023, we have issued a total of approximately 2.1 million LTIP and Performance LTIP units, net of Performance LTIP cancellations. All LTIP and Performance LTIP units other than approximately 1.5 million Performance LTIP units and 124,000 LTIP units have reached full economic parity with, and are convertible into, common units upon vesting.
30

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table presents the redeemable noncontrolling interests in Ashford Trust OP and the corresponding approximate ownership percentage:

| September 30, 2023 |  | December 31, 2022
Redeemable noncontrolling interests in Ashford Trust OP (in thousands) | $ | 22,394 |  |  | $ | 21,550 |
Cumulative adjustments to redeemable noncontrolling interests (1) (in thousands) | $ | 185,451 |  |  | $ | 184,625 |
Ownership percentage of operating partnership | 1.28 | % |  | 0.91 | %

____________________________________
(1) Reflects the excess of the redemption value over the accumulated historical costs.
We allocated net (income) loss to the redeemable noncontrolling interests as presented in the table below (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership | $ | 889 |  |  | $ | 231 |  |  | $ | 1,838 |  |  | $ | 679 |  |  |

14. Equity and Equity-Based Compensation
Common Stock Dividends—The board of directors did not declare a quarterly common stock dividend in 2023 or 2022.
Restricted Stock—We incur stock-based compensation expense in connection with restricted stock awarded to certain employees of Ashford LLC and its affiliates. We also issue common stock to certain of our independent directors, which vests immediately upon issuanc e.
In May 2023, approximately 22,000 shares of common stock were issued to independent directors with a fair value of approximately $95,000, which vested immediately upon grant and have been expensed during the nine months ended September 30, 2023.
In July 2023, approximately 20,000 shares of common stock were issued to an independent director, upon his appointment, with a fair value of approximately $75,000, which vested immediately upon grant and have been expensed during the three and nine months ended September 30, 2023.
Performance Stock Units—The compensation committee of the board of directors of the Company may authorize the issuance of performance stock units (“PSUs”), which have a cliff vesting period of three years, to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period.
With respect to the 2021, 2022 and 2023 award agreements, the criteria for the PSUs are based on performance conditions and market conditions under the relevant literature. The corresponding compensation cost is recognized, based on the corresponding measurement 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 PSUs earned may vary based on the estimated probable achievement of certain performance targets (performance conditions). The number of PSUs to be earned based on the applicable performance conditions is determined upon the final vesting date. The initial calculation of PSUs 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 for the number of PSUs earned based on the applicable performance targets resulting in a final award calculation ranging from 0% to 250% of the target amount.
In March 2023, 165,000 PSUs with a vesting period of approximately three years were granted. The 2023 awards may be settled in cash or shares of common stock of the Company solely at the option of the Company. During the second quarter, the Company’s stockholders approved an increase to the incentive stock plan, which is sufficient to cover the expected settlements. The 2023 awards, which were originally classified as liability awards, are now classified as equity awards, which resulted in a remeasurement of the award at a new fair value of $811,000.
31

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Preferred Dividends—The board of directors declared quarterly dividends per share as presented below:

| Three Months Ended September 30, |
| 2023 |  | 2022 |
8.45% Series D Cumulative Preferred Stock | $ | 0.5281 |  |  | $ | 0.5281 |  |
7.375% Series F Cumulative Preferred Stock | 0.4609 |  |  | 0.4609 |  |
7.375% Series G Cumulative Preferred Stock | 0.4609 |  |  | 0.4609 |  |
7.50% Series H Cumulative Preferred Stock | 0.4688 |  |  | 0.4688 |  |
7.50% Series I Cumulative Preferred Stock | 0.4688 |  |  | 0.4688 |  |

Stock Repurchases—On April 6, 2022, the board of directors approved a stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock and preferred stock having an aggregate value of up to $200 million. The board of directors’ authorization replaced the previous repurchase authorization that the board of directors authorized in December 2017. No shares of our common stock or preferred stock were repurchased subject to the repurchase program during the three and nine months ended September 30, 2023 and 2022, respectively.
15. Redeemable Preferred Stock
Series J Redeemable Preferred Stock
The Company enters into equity distribution agreements with certain sales agents to sell from time-to-time shares of the Series J Redeemable Preferred Stock (the “Series J Preferred Stock”). Pursuant to such equity distribution agreements, the Company is offering a maximum of 20.0 million shares of Series J Preferred Stock or Series K Preferred Stock in a primary offering at a price of $25.00 per share. The Company is also offering a maximum of 8.0 million shares of the Series J Preferred Stock or Series K Preferred Stock pursuant to a dividend reinvestment plan (the “DRIP”) at $25.00 per share (the “Stated Value”).
The Series J Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (Series D Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and Series K Preferred Stock) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.
Holders of the Series J Preferred Stock shall not have any voting rights, except for if and whenever dividends on any shares of the Series J Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive and the number of directors then constituting the board shall be increased by two and the holders of such shares of Series J Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series J Preferred Stock) shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.
Each share is redeemable at any time, at the option of the holder, at a redemption price of $25.00 per share, plus any accumulated, accrued, and unpaid dividends, less a redemption fee. Starting on the second anniversary, each share is redeemable at any time, at the option of the Company, at a redemption price of $25.00 per share, plus any accumulated, accrued, and unpaid dividends (with no redemption fee). The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal number of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption. The Series J Preferred Stock is also subject to conversion upon certain events constituting a change of control. Upon a change of control, the Company, at its option, may redeem, within 120 days, outstanding shares at a redemption price equal to the Stated Value plus an amount equal to any accrued but unpaid dividends. The Company must pay the redemption price in cash upon a change of control.
The redemption fee shall be an amount equal to:
•8.0% of the stated value of $25.00 per share (the “Stated Value”) beginning on the Original Issue Date (as defined in the Articles Supplementary) of the shares of the Series J Preferred Stock to be redeemed;
32

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
•5.0% of the Stated Value beginning on the second anniversary from the Original Issue Date of the shares of the Series J Preferred Stock to be redeemed; and
•0% of the Stated Value beginning on the third anniversary from the Original Issue Date of the shares of the Series J Preferred Stock to be redeemed.
The Series J Preferred Stock accrues cash dividends at an annual rate equal to 8.0% per annum of the Stated Value beginning on the date of the first settlement of the Series J Preferred Stock.
Dividends are payable on a monthly basis and payable in arrears on the 15th of each month (or, if such payment date is not a business day, the next succeeding business day) to holders of record at the close of business on the last business day of each month immediately preceding the applicable dividend payment date. Dividends will be computed on the basis of twelve 30-day months and a 360-day year.
The Company has a DRIP that allows participating holders to have their Series J Preferred Stock dividend distributions automatically reinvested in additional shares of the Series J Preferred Stock at a price of $25.00 per share.
The issuance activity of the Series J Preferred Stock is summarized below (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |  |  |
| 2023 |  |  |  | 2023 |  |  |  |
Series J Preferred Stock shares issued (1) | 1,048 |  |  |  |  | 2,535 |  |  |  |  |
Net proceeds | $ | 23,583 |  |  |  |  | $ | 57,041 |  |  |  |  |

________
(1)Exclusive of shares issued under the DRIP.
The Series J Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside of the Company’s control. As such, the Series J Preferred Stock is classified outside of permanent equity.
At the date of issuance, the carrying amount of the Series J Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be adjusted to the redemption amount each reporting period.
The redemption value adjustment of Series J Preferred Stock is summarized below (in thousands):

|  |  |  |  |  | September 30, 2023 |  | December 31, 2022 |  |  |  |
Series J Preferred Stock |  |  |  |  |  | $ | 60,482 |  |  | $ | 2,004 |  |  |  |  |
Cumulative adjustments to Series J Preferred Stock (1) |  |  |  |  |  | $ | 2,821 |  |  | $ | 926 |  |  |  |  |

________
(1)Reflects the excess of the redemption value over the accumulated carrying value.
The following table summarizes dividends declared (in thousands):

| Three Months Ended September 30, |  |  |  | Nine Months Ended September 30,
| 2023 |  |  |  | 2023 |  |  |  |
Series J Preferred Stock | $ | 1,130 |  |  |  |  | $ | 1,881 |  |  |  |  |

33

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The redemption activities of Series J Preferred stock is summarized below (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |  |  |
| 2023 |  |  |  | 2023 |  |  |  |
Series J Preferred Stock shares redeemed | 1 |  |  |  |  | 3 |  |  |  |  |
Redemption amount, net of redemption fees | $ | 22 |  |  |  |  | $ | 75 |  |  |  |  |

Series K Redeemable Preferred Stock
The Company enters into equity distribution agreements with certain sales agents to sell from time-to-time shares of the Series K Redeemable Preferred Stock (the “Series K Preferred Stock”). Pursuant to such equity distribution agreements, the Company is offering a maximum of 20.0 million shares of Series K Preferred Stock or Series J Preferred Stock in a primary offering at a price of $25.00 per share. The Company is also offering a maximum of 8.0 million shares of the Series K Preferred Stock or Series J Preferred Stock pursuant to the DRIP at the Stated Value.
The Series K Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (Series D Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.
Holders of the Series K Preferred Stock shall not have any voting rights, except for if and whenever dividends on any shares of the Series K Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive, and the number of directors then constituting the board shall be increased by two and the holders of such shares of Series K Preferred Stock (voting together as a single class with all other classes or series of capital stock ranking on a parity with the Series K Preferred Stock) shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.
Each share is redeemable at any time, at the option of the holder, at a redemption price of $25.00 per share, plus any accumulated, accrued, and unpaid dividends, less a redemption fee. Starting on the second anniversary, each share is redeemable at any time, at the option of the Company, at a redemption price of $25.00 per share, plus any accumulated, accrued, and unpaid dividends (with no redemption fee). The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal number of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption. The Series K Preferred Stock is also subject to conversion upon certain events constituting a change of control. Upon a change of control, the Company, at its option, may redeem, within 120 days, outstanding shares at a redemption price equal to the Stated Value plus an amount equal to any accrued but unpaid dividends. The Company must pay the redemption price in cash upon a change of control.
The redemption fee shall be an amount equal to:
•1.5% of the stated value of $25.00 per share (the “Stated Value”) beginning on the Original Issue Date (as defined in the Articles Supplementary) of the shares of the Series K Preferred Stock to be redeemed; and
•0% of the Stated Value beginning on the first anniversary from the Original Issue Date of the shares of the Series K Preferred Stock to be redeemed.
Holders of Series K Preferred Stock are entitled to receive cumulative cash dividends at the initial rate of 8.2% per annum of the Stated Value of $25.00 per share (equivalent to an annual dividend rate of $2.05 per share). Beginning one year from the date of original issuance of each share of Series K Preferred Stock and on each one-year anniversary thereafter for such share of Series K Preferred Stock, the dividend rate shall increase by 0.10% per annum; provided, however, that the dividend rate for any share of Series K Preferred Stock shall not exceed 8.7% per annum of the Stated Value.
Dividends are payable on a monthly basis in arrears on the 15th of each month (or, if such payment date is not a business day, on the next succeeding business day) to holders of record at the close of business on the last business day of each month immediately preceding the applicable dividend payment date. Dividends will be computed on the basis of twelve 30-day months and a 360-day year.
34

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The Company has a DRIP that allows participating holders to have their Series K Preferred Stock dividend distributions automatically reinvested in additional shares of the Series K Preferred Stock at a price of $25.00 per share.
The issuance activity of the Series K Preferred Stock is summarized below (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |  |  |
|  | 2023 |  |  |  | 2023 |  |  |  |
Series K Preferred Stock shares issued (1) |  | 82 |  |  |  |  | 152 |  |  |  |  |
Net proceeds |  | $ | 1,999 |  |  |  |  | $ | 3,695 |  |  |  |  |

________
(1)Exclusive of shares issued under the DRIP.
The Series K Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside of the Company’s control. As such, the Series K Preferred Stock is classified outside of permanent equity.
At the date of issuance, the carrying amount of the Series K Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be adjusted to the redemption amount each reporting period.
The redemption value adjustment of Series K Preferred Stock is summarized below (in thousands):

|  |  |  |  |  |  | September 30, 2023 |  | December 31, 2022 |  |  |  |
Series K Preferred Stock |  |  |  |  |  |  | $ | 3,798 |  |  | $ | 44 |  |  |  |  |
Cumulative adjustments to Series K Preferred Stock (1) |  |  |  |  |  |  | $ | 118 |  |  | $ | 20 |  |  |  |  |

________
(1)Reflects the excess of the redemption value over the accumulated carrying value.
The following table summarizes dividends declared (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2023 |  |  |  | 2023 |  |  |  |
Series K Preferred Stock |  | $ | 61 |  |  |  |  | $ | 98 |  |  |  |  |

16. Related Party Transactions
Ashford Inc.
Advisory Agreement
Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor. Our chairman, Mr. Monty J. Bennett, also serves as chairman of the board of directors and chief executive officer of Ashford Inc.
Under our advisory agreement, we pay advisory fees to Ashford LLC. Advisory fees consist of base fees and incentive fees. We pay a monthly base fee in an amount equal to 1/12 of (i) 0.70% of the Total Market Capitalization (as defined in our advisory agreement) of the Company for the prior month, plus (ii) the Net Asset Fee Adjustment (as defined in our advisory agreement), if any, on the last day of the prior month during which the advisory agreement was in effect; provided, however, that in no event shall the Base Fee (as defined in our advisory agreement) for any month be less than the Minimum Base Fee as provided by the advisory agreement. The Company shall pay the Base Fee or the Minimum Base Fee (as defined in our advisory agreement) on the fifth business day of each month.
The Minimum Base Fee for Ashford Trust for each quarter beginning January 1, 2021 is equal to the greater of:
(i) ninety percent (90%) of the base fee paid for the same month in the prior fiscal year and
(ii) 1/12th of the G&A Ratio (as defined in the advisory agreement) for the most recently completed fiscal quarter multiplied by the Company’s Total Market Capitalization.
35

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We are also required to pay Ashford LLC an incentive fee that is measured annually (or for a stub period if the advisory agreement is terminated at other than year-end). In each year that the Company’s total shareholder return exceeds the average total shareholder return for the peer group, the Company shall pay to Ashford LLC an incentive fee. The incentive fee, if any, subject to the Fixed Coverage Charge Ratio Condition (as defined in the advisory agreement), shall be payable in arrears in three equal annual installments.
We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, risk management advisory and asset management services, as specified in the advisory agreement. We also record equity-based compensation expense for equity grants of common stock and LTIP units awarded to officers and employees of Ashford LLC in connection with providing advisory services.
The following table summarizes the advisory services fees incurred (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |
Advisory services fee |  |  |  |  |  |  |  |  |  |
Base advisory fee | $ | 8,121 |  |  | $ | 8,854 |  |  | $ | 24,839 |  |  | $ | 26,202 |  |  |  |
Reimbursable expenses (1) | 2,884 |  |  | 2,430 |  |  | 9,176 |  |  | 7,365 |  |  |  |
Equity-based compensation (2) | 1,390 |  |  | 1,229 |  |  | 3,635 |  |  | 4,609 |  |  |  |
Total advisory services fee | $ | 12,395 |  |  | $ | 12,513 |  |  | $ | 37,650 |  |  | $ | 38,176 |  |  |  |

________
(1)Reimbursable expenses include overhead, internal audit, risk management advisory, asset management services and deferred cash awards.
(2) Equity-based compensation is associated with equity grants of Ashford Trust’s common stock, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.
Pursuant to the Company’s hotel management agreements with each hotel management company, the Company bears the economic burden for casualty insurance coverage. Under the advisory agreement, Ashford Inc. secures casualty insurance policies to cover Ashford Trust, Braemar Hotels & Resorts Inc. (“Braemar”), their hotel managers, as needed, and Ashford Inc. The total loss estimates included in such policies are based on the collective pool of risk exposures from each party. Ashford Inc.’s risk management department manages the casualty insurance program. Each year Ashford Inc.’s risk management department collects funds from Ashford Trust, Braemar and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.
On September 27, 2022, an agreement was entered into by Ashford Inc., Ashford Trust and Braemar pursuant to which the Advisor is to implement the REITs cash management strategies. This will include actively managing the REITs excess cash by primarily investing in short-term U.S. Treasury securities. The annual fee is 20 bps of the average daily balance of the funds managed by the advisor and is payable monthly in arrears.
Due to Ashford Inc., net as of September 30, 2023, includes a $1.2 million security deposit paid to Remington Hotel Corporation (“RHC”) for office space allocated to us under our advisory agreement. It will be held as security for the payment of our allocated share of office space rental. If unused it will be returned to us upon lease expiration or earlier termination.
On March 15, 2022, we entered into a Limited Waiver Under Advisory Agreement (the “2022 Limited Waiver”) with Ashford Trust OP, Ashford TRS, Ashford Inc. and Ashford LLC. The Company, Ashford Trust OP, Ashford TRS and the Advisor are parties to the Second Amended and Restated Advisory Agreement, which (i) allocates responsibility for certain employee costs between us and our advisor and (ii) permits our board of directors to issue annual equity awards in the Company or Ashford Trust OP to employees and other representatives of our advisor based on achievement by the Company of certain financial or other objectives or otherwise as our board of directors sees fit. Pursuant to the 2022 Limited Waiver, the Company, Ashford Trust OP, Ashford TRS and the Advisor waived the operation of any provision in the advisory agreement that would otherwise have limited our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2022 cash incentive compensation to employees and other representatives of our advisor; provided that such awarded cash incentive compensation does not exceed $8.5 million, in the aggregate, during the waiver period.
On March 2, 2023, we entered into a second Limited Waiver Under Advisory Agreement (the “2023 Limited Waiver”) with Ashford Trust OP, Ashford TRS, Ashford Inc. and Ashford LLC. Pursuant to the 2023 Limited Waiver, the Company,
36

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Ashford Trust OP, Ashford TRS and the Advisor waived the operation of any provision in the advisory agreement that would otherwise limit our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2023 cash incentive compensation to employees and other representatives of our advisor; provided that such awarded cash incentive compensation does not exceed $13.1 million, in the aggregate, during the waiver period.
Lismore
We engage Lismore or its subsidiaries to provide debt placement services and assist with loan modifications on our behalf.
During June 2023, we entered into various 12-month agreements with Lismore to seek modifications or refinancings of certain mortgage loans of the Company. For the three and nine months ended September 30, 2023, we incurred fees of approximately $0 and $525,000, respectively, to Lismore in nonrefundable work fees. The unamortized fees are included in “other assets” on the consolidated balance sheet, and are amortized on a straight line basis over the term of the agreements.
In addition to the above agreements, we incurred fees from Lismore of $246,000 and $1.2 million for the three and nine months ended September 30, 2023, respectively, and $0 and $690,000 for the three and nine months ended September 30, 2022, respectively.
Ashford Securities
On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by Ashford Inc., Ashford Trust and Braemar (collectively, the “Parties” and each individually a “Party”) with respect to funding certain expenses of Ashford Securities LLC, a subsidiary of Ashford Inc. (“Ashford Securities”). Beginning on the effective date of the Amended and Restated Contribution Agreement, costs were allocated 50% to Ashford Inc., 50% to Braemar and 0% to Ashford Trust. Upon reaching the earlier of $400 million in aggregate preferred equity offerings raised, or June 10, 2023, there will be a true up (the “Amended and Restated True-up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual amount contributed by each company will be based on the actual amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively, through Ashford Securities (the resulting ratio of contributions among the Parties, the “Initial True-up Ratio”). On January 27, 2022, Ashford Trust, Braemar and Ashford Inc. entered into a Second Amended and Restated Contribution Agreement which provided for an additional $18 million in expenses to be reimbursed with all expenses allocated 45% to Ashford Trust, 45% to Braemar and 10% to Ashford Inc.
On February 1, 2023, Ashford Trust entered into a Third Amended and Restated Contribution Agreement with Ashford Inc. and Braemar. The Third Amended and Restated Contribution Agreement states that after the Amended and Restated True-Up Date occurs, capital contributions for the remainder of fiscal year 2023 will be divided between each Party based on the Initial True-Up Ratio. Thereafter on a yearly basis at year-end, starting with the year-end of 2023, there will be a true-up between the Parties whereby there will be adjustments so that the capital contributions made by each Party will be based on the cumulative amount of capital raised by each Party through Ashford Securities as a percentage of the total amount raised by the Parties collectively through Ashford Securities since June 10, 2019 (the resulting ratio of capital contributions among the Company, Ashford Inc. and Braemar following this true-up, the “Cumulative Ratio”). Thereafter, the capital contributions will be divided among each Party in accordance with the Cumulative Ratio, as recalculated at the end of each year.
During the year ended December 31, 2022, the funding estimate was revised based on the latest capital raise estimates of the aggregate capital raised through Ashford Securities. As of December 31, 2022, Ashford Trust had funded approximately $6.2 million of which $126,000 of the pre-funded amount was included in “other assets” and $5.9 million was included in “due from Ashford Inc., net” on our consolidated balance sheet. In March 2023, Ashford Inc. paid $6.1 million to Ashford Trust as a result of the contribution true-up between the entities described above. As of September 30, 2023, Ashford Trust has funded approximately $166,000 and has a $2.4 million payable that is included in “due to Ashford Inc., net” on our consolidated balance sheet.
The table below summarizes the amount Ashford Trust has expensed related to reimbursed operating expenses of Ashford Securities (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Line Item |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Corporate, general and administrative |  | $ | 1,212 |  |  | $ | (3,522) |  |  | $ | 2,312 |  |  | $ | (2,331) |  |  |

37

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Design and Construction Services
Premier Project Management LLC (“Premier”), as a subsidiary of Ashford Inc., provides design and construction services to our hotels, including construction management, interior design, architectural services, and the purchasing, freight management, and supervision of installation of FF&E and related services. Pursuant to the design and construction services agreement, we pay Premier: (a) design and construction fees of up to 4% of project costs; and (b) market service fees at current market rates with respect to construction management, interior design, FF&E purchasing, FF&E expediting/freight management, FF&E warehousing and FF&E installation and supervision.
Hotel Management Services
At September 30, 2023, Remington Hospitality managed 68 of our 100 hotel properties.
We pay monthly hotel management fees equal to the greater of approximately $17,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues as well as annual incentive management fees, if certain operational criteria were met, and other general and administrative expense reimbursements primarily related to accounting services.
17. Commitments and Contingencies
Restricted Cash—Under certain management and debt agreements for our hotel properties existing at September 30, 2023, escrow payments are required for insurance, real estate taxes, and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow generally 4% to 6% of gross revenues for capital improvements. From time to time, the Company may work with its property managers and lenders in order to utilize lender and manager held reserves to fund operating shortfalls.
Franchise Fees—Under franchise agreements for our hotel properties existing at September 30, 2023, we pay franchisor royalty fees between 3% and 6% of gross rooms revenue and, in some cases, 1% to 3% of food and beverage revenues. Additionally, we pay fees for marketing, reservations, and other related activities aggregating between 1% and 4% of gross rooms revenue and, in some cases, food and beverage revenues. These franchise agreements expire on varying dates between 2024 and 2047. When a franchise term expires, the franchisor has no obligation to renew the franchise. In addition, if we breach the franchise agreement and the franchisor terminates a franchise prior to its expiration date, we may be liable for up to three times the average annual fees incurred for that property.
The table below summarizes the franchise fees incurred (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Line Item |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Other hotel expenses |  | $ | 16,549 |  |  | $ | 15,616 |  |  | $ | 49,612 |  |  | $ | 43,789 |  |  |

Management Fees—Under hotel management agreements for our hotel properties existing at September 30, 2023, we pay monthly hotel management fees equal to the greater of approximately $17,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues, or in some cases 2% to 7% of gross revenues, as well as annual incentive management fees, if applicable. These hotel management agreements expire from 2025 through 2038, with renewal options. If we terminate a hotel management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term and liquidated damages or, in certain circumstances, we may substitute a new management agreement.
Income Taxes—We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years 2018 through 2022 remain subject to potential examination by certain federal and state taxing authorities.
Litigation—On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects nine hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: (i) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (ii) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class; however, the total number of employees in the
38

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
class has not been definitively determined and is the subject of continuing discovery. The opt out period has been extended until such time that discovery has concluded. In May 2023 the trial court requested additional briefing from the parties to determine whether the case should be maintained, dismissed, or the class de-certified. The trial court set a due date of August 7, 2023 for the briefs. After submission of the briefs, the court requested that the parties submit stipulations for the court to rule upon. If this litigation goes to trial, we expect that the earliest the trial would occur is the last quarter of 2023, based on various extensions to which the parties have agreed. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time. As of September 30, 2023, no amounts have been accrued.
We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the Americans with Disability Act and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations, or cash flow.
During the quarter ended September 30, 2023, we had a cyber incident that resulted in the potential exposure of certain employee personal information. We have completed an investigation and have identified certain employee information may have been exposed, but we have not identified that any customer information was exposed. Systems have been substantially restored with minimal effect on certain hotel operations. We believe that we maintain a sufficient level of insurance coverage related to such events, and the related incremental costs incurred to date are immaterial. It is reasonably possible that the Company may incur additional costs related to the matter, but we are unable to predict with certainty the ultimate amount or range of potential loss. At this time, no litigation has been filed nor has any been threatened.
Our assessment may change depending upon the development of any current or future legal proceedings, and the final results of such legal proceedings cannot be predicted with certainty. If we ultimately do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.
18. Segment Reporting
We operate in one business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refer to owning hotel properties through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics. As of September 30, 2023 and December 31, 2022, all of our hotel properties were domestically located.
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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with the unaudited financial statements and notes thereto appearing elsewhere herein. This report contains forward-looking statements within the meaning of the federal securities laws. Ashford Hospitality Trust, Inc. (the “Company,” “we,” “our” or “us”) cautions investors that any forward-looking statements presented herein, or which management may express orally or in writing from time to time, are based on management’s beliefs and assumptions at that time.
Throughout this Form 10-Q, we make forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature:
•our business and investment strategy;
•anticipated or expected purchases, sales or dispositions of assets;
•our projected operating results;
•completion of any pending transactions;
•our ability to restructure existing property-level indebtedness;
•our ability to secure additional financing to enable us to operate our business;
•our understanding of our competition;
•projected capital expenditures; and
•the impact of technology on our operations and business.
Such forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our securities. Additionally, the following factors could cause actual results to vary from our forward-looking statements:
•factors discussed in our Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (“SEC”) on March 10, 2023, including those set forth under the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties,” as supplemented by our subsequent Quarterly Reports on Form 10-Q and other filings under the Exchange Act;
•rising interest rates and inflation;
•macroeconomic conditions, such as a prolonged period of weak economic growth and volatility in capital markets;
•uncertainty in the banking sector and market volatility due to the failures of Silicon Valley Bank, New York Signature Bank and First Republic Bank;
•extreme weather conditions may cause property damage or interrupt business;
•actions by the lenders of the Oaktree Credit Agreement to foreclose on our assets which are pledged as collateral;
•general volatility of the capital markets and the market price of our common and preferred stock;
•general and economic business conditions affecting the lodging and travel industry;
•changes in our business or investment strategy;
•availability, terms, and deployment of capital;
•unanticipated increases in financing and other costs;
•changes in our industry and the market in which we operate and local economic conditions;
•the degree and nature of our competition;
•actual and potential conflicts of interest with Ashford LLC, Remington Hospitality, Premier, Braemar, our executive officers and our non-independent directors;
•changes in personnel of Ashford LLC or the lack of availability of qualified personnel;
•changes in governmental regulations, accounting rules, tax rates and similar matters;
40

•legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”), and related rules, regulations and interpretations governing the taxation of real estate investment trusts (“REITs”);
•limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and
•future sales and issuances of our common stock or other securities might result in dilution and could cause the price of our common stock to decline.
When considering forward-looking statements, you should keep in mind the matters summarized under “Item 1A. Risk Factors” in Part I of our 2022 Form 10-K filed on March 10, 2023 and this Quarterly Report, and the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, could cause our actual results and performance to differ significantly from those contained in our forward-looking statements. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Quarterly Report. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Quarterly Report to conform these statements to actual results and performance, except as may be required by applicable law.
EXECUTIVE OVERVIEW
General
As of September 30, 2023, our portfolio consisted of 100 consolidated operating hotel properties which represents 22,316 total rooms. Currently, all of our hotel properties are located in the United States.
Based on our primary business objectives and forecasted operating conditions, our current key priorities and financial strategies include, among other things:
•maintaining significant cash and cash equivalents liquidity;
•opportunistically exchanging preferred stock into common stock;
•disposition of non-core hotel properties;
•pursuing capital market activities to enhance long-term stockholder value;
•implementing selective capital improvements designed to increase profitability;
•implementing effective asset management strategies to minimize operating costs and increase revenues;
•financing or refinancing hotels on competitive terms;
•modifying or extending property-level indebtedness;
•utilizing hedges and derivatives to mitigate risks;
•pursuing opportunistic value-add additions to our hotel portfolio; and
•making other investments or divestitures that our board of directors deems appropriate.
Our current investment strategy is to focus on owning predominantly full-service hotels in the upper upscale segment in domestic markets that have RevPAR generally less than twice the national average. We believe that as supply, demand, and capital market cycles change, we will be able to shift our investment strategy to take advantage of new lodging-related investment opportunities as they may develop. Our board of directors may change our investment strategy at any time without stockholder approval or notice. We will continue to seek ways to benefit from the cyclical nature of the hotel industry.
We are advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.
We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them for us under management contracts. As of September 30, 2023, Remington Hospitality, a subsidiary of Ashford Inc., managed 68 of our 100 hotel properties. Third-party management companies managed the remaining hotel properties.
Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to, design and construction services, debt placement and related services, audio visual services, real estate advisory services, insurance claims services, hypoallergenic premium rooms, broker-dealer and distribution services and mobile key technology.
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Mr. Monty J. Bennett is chairman and chief executive officer of Ashford Inc. and, together with his father Mr. Archie Bennett, Jr., as of September 30, 2023, hold a controlling interest in Ashford Inc. The Bennetts owned approximately 610,261 shares of Ashford Inc. common stock, which represented an approximate 19.0% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc. Series D Convertible Preferred Stock, which, along with all unpaid accrued and accumulated dividends thereon, was convertible (at a conversion price of $117.50 per share) into an additional approximate 4,154,013 shares of Ashford Inc. common stock, which if converted as of September 30, 2023, would have increased the Bennetts’ ownership interest in Ashford Inc. to 64.7%. The 18,758,600 shares of Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 360,000 shares owned by trusts.
Recent Developments
The KEYS mortgage loans were entered into on June 13, 2018, each of which had a two-year initial term and five one-year extension options. In order to qualify for a one-year extension in June of 2023, each KEYS loan pool was required to achieve a certain debt yield test. On July 7, 2023, the Company elected not to make the required paydowns to extend its KEYS Pool A loan, KEYS Pool B loan and KEYS Pool F loan, thereby defaulting on such loans. The Company is currently in discussions with its lenders on these loan pools seeking modifications to the extension tests; however, it appears that the most likely outcome will be a consensual transfer of these hotels to the respective lenders. Below is a summary of the hotel properties securing the KEYS Loan Pools A, B and F mortgage loans:
KEYS A Loan Pool
Courtyard Columbus Tipton Lakes – Columbus, IN
Courtyard Old Town – Scottsdale, AZ
Residence Inn Hughes Center – Las Vegas, NV
Residence Inn Phoenix Airport – Phoenix, AZ
Residence Inn San Jose Newark – Newark, CA
SpringHill Suites Manhattan Beach – Hawthorne, CA
SpringHill Suites Plymouth Meeting – Plymouth Meeting, PA
KEYS B Loan Pool
Courtyard Basking Ridge – Basking Ridge, NJ
Courtyard Newark Silicon Valley – Newark, CA
Courtyard Oakland Airport – Oakland, CA
Courtyard Plano Legacy Park – Plano, TX
Residence Inn Plano – Plano, TX
SpringHill Suites BWI Airport – Baltimore, MD
TownePlace Suites Manhattan Beach – Hawthorne, CA
KEYS F Loan Pool
Embassy Suites Flagstaff – Flagstaff, AZ
Embassy Suites Walnut Creek – Walnut Creek, CA
Marriott Bridgewater – Bridgewater, NJ
Marriott Research Triangle Park – Durham, NC
W Atlanta Downtown – Atlanta, GA
On August 1, 2023, the Company sold the WorldQuest Resort in Orlando, Florida for $14.8 million in cash. The sale resulted in a gain of approximately $6.4 million for the three and nine months ended September 30, 2023.
On August 8, 2023, the board of directors of the Company approved amendments to the Company’s Second Amended and Restated Bylaws, as amended.
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RESULTS OF OPERATIONS
Key Indicators of Operating Performance
We use a variety of operating and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include:
•Occupancy—Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of hotels in a given period.
•ADR—ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We use ADR to assess the pricing levels that we are able to generate.
•RevPAR—RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.
RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs.
Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.
We also use funds from operations (“FFO”), Adjusted FFO, earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) and Adjusted EBITDAre as measures of the operating performance of our business. See “Non-GAAP Financial Measures.”
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The following table summarizes the changes in key line items from our consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 (in thousands):

| Three Months Ended September 30, |  | Favorable (Unfavorable) Change |  | Nine Months Ended September 30, |  | Favorable (Unfavorable) Change
| 2023 |  | 2022 |  | 2023 to 2022 |  | 2023 |  | 2022 |  |  |  | 2023 to 2022 |  |
Total revenue | $ | 343,014 |  |  | $ | 328,156 |  |  | $ | 14,858 |  |  | $ | 1,047,649 |  |  | $ | 923,389 |  |  |  |  | $ | 124,260 |  |  |
Total hotel expenses | (232,626) |  |  | (216,256) |  |  | (16,370) |  |  | (698,421) |  |  | (614,190) |  |  |  |  | (84,231) |  |  |
Property taxes, insurance and other | (17,345) |  |  | (17,541) |  |  | 196 |  |  | (52,880) |  |  | (51,289) |  |  |  |  | (1,591) |  |  |
Depreciation and amortization | (45,954) |  |  | (49,428) |  |  | 3,474 |  |  | (140,963) |  |  | (152,444) |  |  |  |  | 11,481 |  |  |
Advisory service fee | (12,395) |  |  | (12,513) |  |  | 118 |  |  | (37,650) |  |  | (38,176) |  |  |  |  | 526 |  |  |
Corporate, general and administrative | (3,871) |  |  | 884 |  |  | (4,755) |  |  | (11,387) |  |  | (6,730) |  |  |  |  | (4,657) |  |  |
Gain (loss) on consolidation of VIE and disposition of assets | 6,390 |  |  | (11) |  |  | 6,401 |  |  | 7,443 |  |  | 273 |  |  |  |  | 7,170 |  |  |
Operating income (loss) | 37,213 |  |  | 33,291 |  |  | 3,922 |  |  | 113,791 |  |  | 60,833 |  |  |  |  | 52,958 |  |  |
Equity in earnings (loss) of unconsolidated entities | (138) |  |  | (147) |  |  | 9 |  |  | (715) |  |  | (451) |  |  |  |  | (264) |  |  |
Interest income | 1,888 |  |  | 1,576 |  |  | 312 |  |  | 6,755 |  |  | 2,153 |  |  |  |  | 4,602 |  |  |
Other income (expense) | 34 |  |  | 241 |  |  | (207) |  |  | 277 |  |  | 426 |  |  |  |  | (149) |  |  |
Interest expense and amortization of discounts and loan costs | (99,380) |  |  | (61,023) |  |  | (38,357) |  |  | (270,485) |  |  | (152,975) |  |  |  |  | (117,510) |  |  |
Write-off of premiums, loan costs and exit fees | (1,263) |  |  | (1,378) |  |  | 115 |  |  | (2,633) |  |  | (3,076) |  |  |  |  | 443 |  |  |
Realized and unrealized gain (loss) on derivatives | (2,678) |  |  | 9,774 |  |  | (12,452) |  |  | 4,490 |  |  | 19,059 |  |  |  |  | (14,569) |  |  |
Income tax benefit (expense) | (127) |  |  | (4,657) |  |  | 4,530 |  |  | (2,410) |  |  | (10,340) |  |  |  |  | 7,930 |  |  |
Net income (loss) | (64,451) |  |  | (22,323) |  |  | (42,128) |  |  | (150,930) |  |  | (84,371) |  |  |  |  | (66,559) |  |  |
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership | 889 |  |  | 231 |  |  | 658 |  |  | 1,838 |  |  | 679 |  |  |  |  | 1,159 |  |  |
Net income (loss) attributable to the Company | $ | (63,562) |  |  | $ | (22,092) |  |  | $ | (41,470) |  |  | $ | (149,092) |  |  | $ | (83,692) |  |  |  |  | $ | (65,400) |  |  |

All hotel properties held during the three and nine months ended September 30, 2023 and 2022 have been included in our results of operations during the respective periods in which they were held. Based on when a hotel property was acquired or disposed, operating results for certain hotel properties are not comparable for the three and nine months ended September 30, 2023 and 2022. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following transactions affect the reporting comparability of our consolidated financial statements:

Hotel Properties |  | Location |  | Type |  | Date
Sheraton Ann Arbor (1) |  | Ann Arbor, MI |  | Disposition |  | September 1, 2022
Hilton Marietta (2) |  | Marietta, GA |  | Acquisition |  | December 16, 2022
WorldQuest Resort (1) |  | Orlando, FL |  | Disposition |  | August 1, 2023

____________________________________
(1) Referred to as “Hotel Dispositions”
(2) Referred to as “Hotel Acquisition”
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The following table illustrates the key performance indicators of the 100 operating hotel properties and WorldQuest included in our results of operations:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
RevPAR (revenue per available room) | $ | 131.44 |  |  | $ | 126.24 |  |  | $ | 133.34 |  |  | $ | 119.19 |
Occupancy | 72.19 | % |  | 70.98 | % |  | 71.97 | % |  | 67.60 | %
ADR (average daily rate) | $ | 182.09 |  |  | $ | 177.84 |  |  | $ | 185.28 |  |  | $ | 176.32 |

The following table illustrates the key performance indicators of the 99 hotel properties that were included in our results of operations for the full nine months ended September 30, 2023 and 2022, respectively:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
RevPAR | $ | 131.71 |  |  | $ | 126.72 |  |  | $ | 133.94 |  |  | $ | 119.85 |
Occupancy | 72.22 | % |  | 70.96 | % |  | 72.07 | % |  | 67.65 | %
ADR | $ | 182.36 |  |  | $ | 178.57 |  |  | $ | 185.85 |  |  | $ | 177.16 |

Comparison of the Three Months Ended September 30, 2023 and 2022
Net Income (Loss) Attributable to the Company. Net loss attributable to the Company increased $41.5 million, from $22.1 million for the three months ended September 30, 2022 (the “2022 quarter”) to $63.6 million for the three months ended September 30, 2023 (the “2023 quarter”) as a result of the factors discussed below.
Revenue. Rooms revenue from our hotel properties increased $10.0 million, or 3.8%, to $270.6 million in the 2023 quarter compared to the 2022 quarter as our hotel properties recover from the effects of the COVID-19 pandemic. This increase is attributable to higher rooms revenue of $10.2 million at our comparable hotel properties and $2.3 million from our Hotel Acquisition partially offset by a decrease of $2.5 million from our Hotel Dispositions. Our comparable hotel properties experienced an increase of 2.1% in room rates and a 126 basis point increase in occupancy.
Food and beverage revenue increased $3.6 million, or 7.3%, to $52.2 million. This increase is attributable to higher sales of food and beverage of $3.1 million at our comparable hotel properties and $723,000 from our Hotel Acquisition partially offset by a decrease of $221,000 from our Hotel Dispositions.
Other hotel revenue, which consists mainly of Internet access, parking, and spa revenue, increased $1.4 million, or 7.4%, to $19.5 million. This increase is primarily attributable to an increase of $1.6 million at our comparable hotel properties and $98,000 from our Hotel Acquisition partially offset by a decrease of $384,000 from our Hotel Dispositions. Other non-hotel revenue decreased $59,000, or 8.1%, to $665,000 in the 2023 quarter as compared to the 2022 quarter.
Hotel Operating Expenses. Hotel operating expenses increased $16.4 million, or 7.6%, to $232.6 million. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and management fees. Direct expenses increased $6.7 million in the 2023 quarter as compared to the 2022 quarter, which was primarily comprised of an increase of $6.3 million from our comparable hotel properties and $900,000 from our Hotel Acquisition partially offset by a decrease $500,000 from our Hotel Dispositions. Direct expenses were 31.4% of total hotel revenue for the 2023 quarter and 30.8% for the 2022 quarter. Indirect expenses and management fees increased $9.7 million in the 2023 quarter as compared to the 2022 quarter, which was primarily comprised of an increase of $8.8 million from our comparable hotel properties and $1.2 million from our Hotel Acquisition partially offset by a decrease of $426,000 from our Hotel Dispositions.
Property Taxes, Insurance and Other. Property taxes, insurance and other expense decreased $196,000, or 1.1%, to $17.3 million during the 2023 quarter compared to the 2022 quarter, which was primarily due to a decrease of $69,000 from our comparable hotel properties and a decrease of $158,000 from our Hotel Dispositions partially offset by an increase of $31,000 from our Hotel Acquisition.
Depreciation and Amortization. Depreciation and amortization decreased $3.5 million, or 7.0%, to $46.0 million during the 2023 quarter compared to the 2022 quarter, which was primarily due to a decrease of $3.5 million from our comparable
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hotel properties primarily related to fully depreciated assets and $122,000 from our Hotel Dispositions partially offset by an increase of $135,000 from our Hotel Acquisition.
Advisory Services Fee. Advisory services fee decreased $118,000, or 0.9%, to $12.4 million in the 2023 quarter compared to the 2022 quarter. The advisory services fee represents fees incurred in connection with the advisory agreement between Ashford Inc. and the Company. In the 2023 quarter, the advisory services fee was comprised of a base advisory fee of $8.1 million, equity-based compensation of $1.4 million associated with equity grants of our common stock, PSUs, LTIP units and Performance LTIP units awarded to the officers and employees of Ashford Inc. and reimbursable expenses of $2.9 million. In the 2022 quarter, the advisory services fee was comprised of a base advisory fee of $8.9 million, equity-based compensation of $1.2 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and reimbursable expenses of $2.4 million.
Corporate, General and Administrative. Corporate, general and administrative expense changed $4.8 million from a credit of $884,000 in the 2022 quarter to an expense of $3.9 million in the 2023 quarter. The increase was primarily attributable to higher reimbursed operating expenses of Ashford Securities of $4.7 million. During the 2022 quarter, the funding estimate was revised based on the latest capital raise estimates of the aggregate equity offerings raised by Ashford Securities, this resulted in a credit to expense of approximately $3.9 million.
Gain (Loss) on Consolidation of VIE and Disposition of Assets. Gain on consolidation of VIE and disposition of assets increased $6.4 million from $11,000 in the 2022 quarter to $6.4 million in the 2023 quarter. The gain in the 2023 quarter primarily related to the sale of WorldQuest Resort in Orlando, Florida. The loss in the 2022 quarter was primarily related to the sale of the Sheraton Ann Arbor.
Equity in Earnings (Loss) of Unconsolidated Entities. Equity in loss of unconsolidated entities decreased $9,000 during the 2023 quarter compared to the 2022 quarter. The 2023 quarter included equity in loss of $125,000 from OpenKey and $13,000 from an investment in an entity that owns the Meritage Resort and Spa and the Grand Reserve at the Meritage in Napa, California. The 2022 quarter included equity in loss of $147,000 from OpenKey.
Interest Income. Interest income was $1.9 million and $1.6 million for the 2023 quarter and the 2022 quarter, respectively. The increase in interest income in the 2023 quarter was primarily attributable to higher short-term interest rates on excess cash and the Company’s cash management agreement with Ashford LLC.
Other Income (Expense). Other income consisted of miscellaneous income of $34,000 in the 2023 quarter. In the 2022 quarter, we recorded other income of $241,000 of other income.
Interest Expense and Amortization of Discounts and Loan Costs. Interest expense and amortization of discounts and loan costs increased $38.4 million, or 62.9%, to $99.4 million during the 2023 quarter compared to the 2022 quarter. The increase is primarily due to higher interest expense of $28.3 million at our comparable hotel properties primarily due to higher interest rates on our variable rate debt, a $2.5 million increase primarily attributable to the amortization of the Oaktree debt discount and lower credits to interest expense of $8.0 million related to the amortization credit of default interest and late charges recorded on mortgage loans previously in default. These increases were partially offset by a decrease of $399,000 from our Hotel Dispositions. The average SOFR rates for the 2023 quarter and the 2022 quarter were 5.08% and 2.08%, respectively. The average LIBOR rate for the 2022 quarter was 2.47%, respectively.
Write-off of Premiums, Loan Costs and Exit Fees. Write-off of premiums, loan costs and exit fees decreased $115,000 to $1.3 million in the 2023 quarter compared to the 2022 quarter. In the 2023 quarter, we incurred fees of $1.3 million related to loan refinances and modifications. In the 2022 quarter, we wrote off unamortized loan costs of $265,000 and a pro rata write-off of the Oaktree loan discount in the amount of $514,000 upon making a $4.0 million pay down on the Oaktree loan. Additionally, we incurred third-party fees of $599,000.
Realized and Unrealized Gain (Loss) on Derivatives. Realized and unrealized gain (loss) on derivatives changed $12.5 million from a gain of $9.8 million in the 2022 quarter to a loss of $2.7 million in the 2023 quarter. In the 2023 quarter, we recognized an unrealized loss of $12.6 million associated with interest rate caps and an unrealized loss of $436,000 from the revaluation of the embedded debt derivative in the Oaktree Agreement, partially offset by a realized gain of $10.3 million related to payments from counterparties on interest rate caps. In the 2022 quarter, we recognized an unrealized gain of $719,000 from the revaluation of the embedded debt derivative and an unrealized gain of $9.1 million associated with interest rate caps.
Income Tax (Expense) Benefit. Income tax expense decreased $4.5 million, from $4.7 million in the 2022 quarter to $127,000 in the 2023 quarter. This decrease was primarily due to a decrease in the profitability of our Ashford TRS entities in the 2023 quarter compared to the 2022 quarter.
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Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net losses of $889,000 in the 2023 quarter and $231,000 in the 2022 quarter. Redeemable noncontrolling interests represented ownership interests of 1.28% and 0.91% in the operating partnership at September 30, 2023 and 2022, respectively.
Comparison of the Nine Months Ended September 30, 2023 and 2022
Net Income (Loss) Attributable to the Company. Net loss attributable to the Company increased $65.4 million from $83.7 million for the nine months ended September 30, 2022 (“2022 period”) to $149.1 million for the nine months ended September 30, 2023 (“2023 period”) as a result of the factors discussed below.
Revenue. Rooms revenue from our hotel properties increased $86.0 million, or 11.8%, to $817.5 million in the 2023 period compared to the 2022 period. This increase is attributable to higher rooms revenue of $85.1 million at our comparable hotel properties as our hotel properties recover from the effects of the COVID-19 pandemic and an increase of $6.5 million from our Hotel Acquisition partially offset by a decrease of $5.6 million from our Hotel Dispositions. Our comparable hotel properties experienced an increase of 4.9% in room rates and an increase of 442 basis points in occupancy.
Food and beverage revenue increased $33.2 million, or 23.8%, to $172.9 million in the 2023 period compared to the 2022 period. This increase is attributable to higher sales of food and beverage of $31.8 million at our comparable hotel properties and an increase of $2.3 million from our Hotel Acquisition partially offset by a decrease of $880,000 from our Hotel Dispositions.
Other hotel revenue, which consists mainly of Internet access, parking, and spa revenue, increased $5.1 million, or 10.2%, to $55.1 million in the 2023 period compared to the 2022 period. This increase is attributable to higher other revenue of $5.5 million from our comparable hotel properties as our hotel properties recover from the effects of the COVID-19 pandemic and an increase of $266,000 from our Hotel Acquisition partially offset by a decrease of $639,000 from our Hotel Dispositions. Other revenue decreased $70,000, or 3.2%, to $2.1 million in the 2023 period compared to the 2022 period.
Hotel Operating Expenses. Hotel operating expenses increased $84.2 million, or 13.7%, to $698.4 million in the 2023 period compared to the 2022 period. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and management fees. Direct expenses increased $41.5 million in the 2023 period compared to the 2022 period, comprised of an increase of $40.7 million from our comparable hotel properties and an increase of $2.6 million from our Hotel Acquisition, partially offset by a decrease of $1.8 million from our Hotel Dispositions. Direct expenses were 30.7% of total hotel revenue for the 2023 period and 30.3% for the 2022 period. Indirect expenses and management fees increased $42.8 million in the 2023 period compared to the 2022 period, comprised of an increase of $41.3 million from our comparable hotel properties and $3.6 million from our Hotel Acquisition partially offset by $2.1 million from our Hotel Dispositions.
Property Taxes, Insurance and Other. Property taxes, insurance and other expense increased $1.6 million or 3.1%, to $52.9 million in the 2023 period compared to the 2022 period, which was primarily due to an increase of $1.9 million from our comparable hotel properties and $108,000 from our Hotel Acquisition partially offset by a decrease of $453,000 from our Hotel Dispositions.
Depreciation and Amortization. Depreciation and amortization decreased $11.5 million or 7.5%, to $141.0 million in the 2023 period compared to the 2022 period, which consisted of lower depreciation of $10.5 million from our comparable hotel properties primarily related to fully depreciated assets and $1.4 million from our Hotel Dispositions partially offset by an increase of $402,000 from our Hotel Acquisition.
Advisory Services Fee. Advisory services fee decreased $526,000, or 1.4%, to $37.7 million in the 2023 period compared to the 2022 period. The advisory services fee represents fees incurred in connection with the advisory agreement between Ashford Inc. and the Company. In the 2023 period, the advisory services fee was comprised of a base advisory fee of $24.8 million, equity-based compensation of $3.6 million associated with equity grants of our common stock, PSUs, LTIP units and Performance LTIP units awarded to the officers and employees of Ashford Inc. and reimbursable expenses of $9.2 million. In the 2022 period, the advisory services fee was comprised of a base advisory fee of $26.2 million, equity-based compensation of $4.6 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and reimbursable expenses of $7.4 million.
Corporate, General and Administrative. Corporate, general and administrative expense increased $4.7 million, or 69.2%, to $11.4 million in the 2023 period compared to the 2022 period. The increase was primarily attributable to higher reimbursed operating expenses of Ashford Securities of $4.6 million. During the third quarter of 2022, the funding estimate was revised based on the latest capital raise estimates of the aggregate equity offerings raised by Ashford Securities, this resulted in a credit to expense of approximately $3.9 million.
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Gain (Loss) on Consolidation of VIE and Disposition of Assets. Gain on consolidation of VIE and disposition of assets increased $7.2 million, from $273,000 in the 2022 period to $7.4 million in the 2023 period. The gain in the 2023 period was primarily related to a $1.1 million gain for the consolidation of the VIE, which is represented by the difference between the fair value of the assets and liabilities recognized, the fair value of the non-controlling interest and the previous carrying value of the Company’s investment in 815 Commerce MM and $6.4 million related to the sale of WorldQuest in Orlando, Florida. The gain in the 2022 period was primarily related to a gain related to the sale of six WorldQuest condominiums.
Equity in Earnings (Loss) of Unconsolidated Entities. Equity in loss of unconsolidated entities was $715,000 in the 2023 period, which consisted of equity in loss of $427,000 from OpenKey and $288,000 in the Napa resort investment and $451,000 in the 2022 period, which consisted of our share of loss in OpenKey.
Interest Income. Interest income was $6.8 million and $2.2 million in the 2023 period and the 2022 period, respectively. The increase in interest income in the 2023 quarter was primarily attributable to higher short-term interest rates on excess cash and the Company’s cash management agreement with Ashford LLC.
Other Income (Expense). Other income decreased $149,000 from $426,000 in the 2022 period to $277,000 in the 2023 period. In the 2023 period we recorded miscellaneous income of $372,000. In the 2022 period, we recorded other income of $426,000.
Interest Expense and Amortization of Discounts and Loan Costs. Interest expense and amortization of discounts and loan costs increased $117.5 million, or 76.8%, to $270.5 million in the 2023 period compared to the 2022 period. The increase was primarily due to a $103.8 million increase in interest expense at our comparable hotel properties primarily due to higher interest rates on our variable rate debt, lower credits to interest expense of $10.9 million related to the amortization credit of default interest and late charges recorded on mortgage loans previously in default and a $4.0 million increase primarily attributable to the amortization of the Oaktree debt discount. These increases were partially offset by a decrease of $1.1 million from our Hotel Dispositions. The average SOFR rates for the 2023 period and the 2022 period were 4.78% and 0.97%, respectively. The average LIBOR rate for the 2022 period was 1.24%.
Write-off of Premiums, Loan Costs and Exit Fees. Write-off of premiums, loan costs and exit fees decreased $443,000 to $2.6 million in the 2023 period compared to the 2022 period. In the 2023 period, we incurred fees of $2.6 million related to loan refinances and modifications. In the 2022 period, we recognized Lismore fees of $643,000 that reflects the amortization over the service period of the Lismore Agreement. We wrote off unamortized loan costs of $265,000 and a pro rata write-off of the Oaktree loan discount in the amount of $514,000 upon making a $4.0 million pay down on the Oaktree loan. Additionally, we incurred fees of $1.7 million related to loan refinances and modifications.
Realized and Unrealized Gain (Loss) on Derivatives. Realized and unrealized gain on derivatives decreased $14.6 million from $19.1 million in the 2022 period to $4.5 million in the 2023 period. In the 2023 period, we recognized a realized gain of $30.8 million related to payments from counterparties on interest rate caps and an unrealized gain of $591,000 from the revaluation of the embedded debt derivative in the Oaktree Agreement, partially offset by an unrealized loss of $26.9 million associated with interest rate caps. In the 2022 period, we recorded an unrealized gain of $4.6 million from the revaluation of the embedded debt derivative in the Oaktree Credit Agreement and an unrealized gain of $14.4 million from interest rate caps.
Income Tax (Expense) Benefit. Income tax expense decreased $7.9 million, from $10.3 million in the 2022 period to $2.4 million in the 2023 period. This decrease was primarily due to a decrease in the profitability of our Ashford TRS entities in the 2023 period compared to the 2022 period.
Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net losses of $1.8 million and $679,000 in the 2023 period and the 2022 period, respectively. Redeemable noncontrolling interests represented ownership interests of 1.28% and 0.91% in the operating partnership at September 30, 2023 and 2022, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
As of September 30, 2023, the Company held cash and cash equivalents of $184.7 million and restricted cash of $172.2 million (including amounts held for sale), the vast majority of which is comprised of lender and manager-held reserves. As of September 30, 2023, $24.1 million was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs. At September 30, 2023, our net debt to gross assets was 69.0%.
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The Company’s cash and cash equivalents are primarily comprised of corporate cash invested in short-term U.S. Treasury securities with maturity dates of less than 90 days and corporate cash held at commercial banks in Insured Cash Sweep (“ICS”) accounts, which are fully insured by the FDIC. The Company’s cash and cash equivalents also includes property-level operating cash deposited with commercial banks that have been designated as a Global Systemically Important Bank (“G-SIB”) by the Financial Stability Board (“FSB”) and a small amount deposited with other commercial banks.
Based on our current level of operations, our cash flow from operations and our existing cash balances should be adequate to meet upcoming anticipated requirements for interest and principal payments on debt (excluding any potential final maturity payments and paydowns for extension tests), working capital, and capital expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S. federal income tax purposes. With respect to upcoming maturities, no assurances can be given that we will be able to refinance our upcoming maturities. Additionally, no assurances can be given that we will obtain additional financings or, if we do, what the amount and terms will be. Our failure to obtain future financing under favorable terms could adversely impact our ability to execute our business strategy or may result in lender foreclosure.
Our cash position from operations is affected primarily by macro industry movements in occupancy and rate as well as our ability to control costs. Further, interest rates can greatly affect the cost of our debt service as well as the value of any financial hedges we may put in place. We monitor industry fundamentals and interest rates very closely. Capital expenditures above our reserves will affect cash flow as well and are impacted by inflation.
Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotels declines below a threshold. When these provisions are triggered, substantially all of the profit generated by our hotels is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. During a cash trap, certain disbursements from these hotel operating cash receipts would require consent of our lenders. At September 30, 2023, 31% of our hotels were in cash traps and approximately $4.0 million of our restricted cash was subject to these cash traps. Our loans currently in cash traps may remain subject to cash trap provisions for a substantial period of time which could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.
We have extension options relating to certain property-level loans that will permit us to extend the maturity date of our loans if certain conditions are satisfied at the respective extension dates, including the achievement of debt yield targets required in order to extend such loans. To the extent we decide to extend the maturity date of the debt outstanding under the loans, we may be required to prepay a significant amount of the loans in order to meet the required debt yield targets. There can be no assurances that we will be able to meet the conditions for extensions pursuant to the respective terms of such loans.
If we violate covenants in our debt agreements, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of Ashford Trust or Ashford Trust OP, our operating partnership, and the liabilities of such subsidiaries do not constitute the obligations of Ashford Trust or Ashford Trust OP.
Mortgage and mezzanine loans are nonrecourse to the borrowers, except for customary exceptions or carve-outs that trigger recourse liability to the borrowers in certain limited instances. Recourse obligations typically include only the payment of costs and liabilities suffered by lenders as a result of the occurrence of certain bad acts on the part of the borrower. However, in certain cases, carve-outs could trigger recourse obligations on the part of the borrower with respect to repayment of all or a portion of the outstanding principal amount of the loans. We have entered into customary guaranty agreements pursuant to which we guaranty payment of any recourse liabilities of the borrowers that result from non-recourse carve-outs (which include, but are not limited to, fraud, misrepresentation, willful conduct resulting in waste, misappropriations of rents following an event of default, voluntary bankruptcy filings, unpermitted transfers of collateral, and certain environmental liabilities). In the opinion of management, none of these guaranty agreements, either individually or in the aggregate, are likely to have a material adverse effect on our business, results of operations, or financial condition.
We have entered into certain customary guaranty agreements pursuant to which we guaranty payment of any recourse liabilities of our subsidiaries or joint ventures that may result from non-recourse carve-outs, which include, but are not limited to, fraud, misrepresentation, willful misconduct resulting in waste, misappropriations of rents following an event of default, voluntary bankruptcy filings, unpermitted transfers of collateral, delinquency of trade payables and certain environmental liabilities. Certain of these guarantees represent a guaranty of material amounts, and if we are required to make payments under those guarantees, our liquidity could be adversely affected.
We are committed to an investment strategy where we will pursue hotel-related investments as suitable situations arise. Funds for future hotel-related investments are expected to be derived, in whole or in part, from cash on hand, future borrowings under a credit facility or other loans, or proceeds from additional issuances of common stock, preferred stock (including net
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proceeds from the sale of any shares of Series J Preferred Stock or Series K Preferred Stock), or other securities, asset sales, and joint ventures. However, we have no formal commitment or understanding to invest in additional assets, and there can be no assurance that we will successfully make additional investments. We may, when conditions are suitable, consider additional capital raising opportunities.
Our existing hotel properties are mostly located in developed areas with competing hotel properties. Future occupancy, ADR, and RevPAR of any individual hotel could be materially and adversely affected by an increase in the number or quality of competitive hotel properties, home sharing companies or apartment operators offering short-term rentals in its market area. Competition could also affect the quality and quantity of future investment opportunities.
Debt Transactions
On February 9, 2023, the Company amended its JP Morgan Chase – 8 hotel mortgage loan, which had a current maturity in February 2023. As part of the amendment, the Company repaid $50.0 million in principal, exercised the 2023 loan extension and reduced the 2024 debt yield extension test from 9.25% to 8.50%.
On April 6, 2023, the Company extended its BAML Highland mortgage loan to April 2024. As part of the extension, the Company repaid $45.0 million in principal and the interest rate increased from LIBOR + 3.20% to LIBOR + 3.47%.
On May 19, 2023, we refinanced our $73.5 million mortgage, secured by the Hilton Alexandria and our $25.0 million mortgage, secured by the La Posada de Santa Fe. The new mortgage loan totals $98.5 million. The mortgage loan is interest only and provides for an interest rate of SOFR + 4.00%. The stated maturity is May 2026 with two one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is secured by the Hilton Alexandria and the La Posada de Santa Fe.
On June 9, 2023, the Company exercised a one-year extension option for its Keys Pool C mortgage loan to extend the loan to June 2024. As part of the extension, the Company repaid approximately $62.4 million in principal.
On June 21, 2023, the Company and Ashford Hospitality Limited Partnership, an indirect subsidiary of the Company, entered into Amendment No. 2 with the Lenders and Oaktree Fund Administration, LLC. Amendment No. 2, subject to the conditions set forth therein, provides that, among other things:
(i) the DDTL Commitment Expiration Date will be July 7, 2023, or such earlier date that the Borrower makes an Initial DDTL draw to be used by the Borrower to prepay certain mortgage indebtedness;
(ii) notwithstanding the occurrence of the DDTL Commitment Expiration Date, up to $100,000,000 of Initial DDTLs will be made available by the Lenders for a period of twelve (12) months ending July 7, 2024, subject to the Borrower paying an unused fee of 9% per annum on the undrawn amount;
(iii) Ashford Trust and the Borrower will be permitted to make certain Restricted Payments, including without limitation dividends on Ashford Trust’s preferred stock, without having to maintain Unrestricted Cash in an amount not less than the sum of (x) $100,000,000 plus (y) the aggregate principal amount of DDTLs advanced prior to the date thereof or contemporaneously therewith;
(iv) a default on certain pool mortgage loans will not be counted against the $400,000,000 Mortgage Debt Threshold Amount;
(v) for purposes of the Mortgage Debt Threshold Amount, a certain mortgage loan, with a current aggregate principal amount of $415,000,000, will be deemed to have a principal amount of $400,000,000; and
(vi) when payable by the Borrower under the Credit Agreement, at least 50% of the Exit Fee shall be paid as a Cash Exit Fee.
Effective June 30, 2023, LIBOR is no longer published. Accordingly, all variable interest rate mortgage loans held by the Company that use the LIBOR index transitioned to SOFR beginning on July 1, 2023. Not all lenders will execute loan amendment documents and instead will defer to original loan documents that dictate changes in index rates.
The KEYS mortgage loans were entered into on June 13, 2018, each of which had a two-year initial term and five one-year extension options. In order to qualify for a one-year extension in June of 2023, each KEYS loan pool was required to achieve a certain debt yield test. The Company extended its KEYS Pool C loan with a paydown of approximately $62.4 million, its KEYS Pool D loan with a paydown of approximately $25.6 million, and its KEYS Pool E loan with a paydown of approximately $41.0 million. On June 9, 2023 the Company received a 30-day extension to satisfy the extension conditions in order to negotiate modifications to the respective extension tests. On July 7, 2023, the Company elected not to make the required paydowns to extend its KEYS Pool A loan, KEYS Pool B loan and KEYS Pool F loan, thereby defaulting on such loans. The Company is currently in discussions with its lenders on these loan pools seeking modifications to the extension tests;
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however, it appears that the most likely outcome will be a consensual transfer of these hotels to the respective lenders. Below is a summary of the hotel properties securing the KEYS mortgage loans:
KEYS A Loan Pool
Courtyard Columbus Tipton Lakes – Columbus, IN
Courtyard Old Town – Scottsdale, AZ
Residence Inn Hughes Center – Las Vegas, NV
Residence Inn Phoenix Airport – Phoenix, AZ
Residence Inn San Jose Newark – Newark, CA
SpringHill Suites Manhattan Beach – Hawthorne, CA
SpringHill Suites Plymouth Meeting – Plymouth Meeting, PA
KEYS B Loan Pool
Courtyard Basking Ridge – Basking Ridge, NJ
Courtyard Newark Silicon Valley – Newark, CA
Courtyard Oakland Airport – Oakland, CA
Courtyard Plano Legacy Park – Plano, TX
Residence Inn Plano – Plano, TX
SpringHill Suites BWI Airport – Baltimore, MD
TownePlace Suites Manhattan Beach – Hawthorne, CA
KEYS C Loan Pool
Hyatt Coral Gables – Coral Gables, FL
Hilton Ft. Worth – Fort Worth, TX
Hilton Minneapolis Airport – Bloomington, MN
Sheraton San Diego – San Diego, CA
Sheraton Bucks County, PA – Langhorne, PA
KEYS D Loan Pool
Marriott Beverly Hills – Los Angeles, CA
One Ocean Resort – Atlantic Beach, FL
Marriott Suites Dallas – Dallas, TX
Hilton Santa Fe – Santa Fe, NM
Embassy Suites Dulles – Herndon, VA
KEYS E Loan Pool
Marriott Fremont – Fremont, CA
Embassy Suites Philadelphia – Philadelphia, PA
Marriott Memphis – Memphis, TN
Sheraton Anchorage – Anchorage, AK
Lakeway Resort Austin – Lakeway, TX
KEYS F Loan Pool
Embassy Suites Flagstaff – Flagstaff, AZ
Embassy Suites Walnut Creek – Walnut Creek, CA
Marriott Bridgewater – Bridgewater, NJ
Marriott Research Triangle Park – Durham, NC
W Atlanta Downtown – Atlanta, GA
Equity Transactions
On September 9, 2021, the Company and M3A LP (“M3A”) entered into a purchase agreement (the “M3A Purchase Agreement”), which provides that subject to the terms and conditions set forth therein, the Company may sell to M3A up to approximately 6.0 million shares of common stock, from time to time during the term of the M3A Purchase Agreement. The Company filed a Form S-3, which was declared effective by the SEC on April 1, 2022, to replace the previous Form S-11 and to register for resale any future resales by M3A under the M3A Purchase Agreement. As of November 6, 2023, the Company has issued approximately 900,000 shares of common stock for gross proceeds of approximately $12.9 million under the M3A Purchase Agreement.
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On March 4, 2022, the Company filed an initial registration statement on Form S-3 with the SEC, as amended on April 29, 2022, related to the Company’s non-traded Series J Preferred Stock and Series K Preferred Stock. The registration statement was declared effective by the SEC on May 4, 2022, and contemplates the offering of up to (i) 20.0 million shares of Series J Preferred Stock or Series K Preferred Stock in a primary offering and (ii) 8.0 million shares of Series J Preferred Stock or Series K Preferred Stock pursuant to a dividend reinvestment plan. On May 5, 2022, we filed our prospectus for the offering with the SEC. Ashford Securities, a subsidiary of Ashford Inc., serves as the dealer manager for the offering. As of November 6, 2023, the Company has issued approximately 2.9 million shares of Series J Preferred Stock and received net proceeds of approximately $65.4 million and approximately 166,000 shares of Series K Preferred Stock and received net proceeds of approximately $4.0 million.
On April 6, 2022, the board of directors approved a stock repurchase program (the “Repurchase Program”) pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock and preferred stock having an aggregate value of up to $200 million. The board of directors’ authorization replaced the 2017 Repurchase Program that the board of directors authorized in December 2017. No shares have been repurchased under the Repurchase Program.
On April 11, 2022, the Company entered into the Virtu Equity Distribution Agreement with Virtu, to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $100 million. We will pay Virtu a commission of approximately 1% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of November 6, 2023, the Company has not issued any common stock pursuant to the Virtu Equity Distribution Agreement.
Sources and Uses of Cash
Our principal sources of funds to meet our cash requirements include cash on hand, cash flow from operations, capital market activities, property refinancing proceeds and asset sales. Additionally, our principal uses of funds are expected to include possible operating shortfalls, owner-funded capital expenditures, dividends, new investments, and debt interest and principal payments. Items that impacted our cash flow and liquidity during the periods indicated are summarized as follows:
Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities, pursuant to our consolidated statements of cash flows, which includes changes in balance sheet items, were $36.0 million and $39.5 million for the nine months ended September 30, 2023 and 2022, respectively. Cash flows provided by operations were impacted by changes in hotel operations, our hotel dispositions in 2022 and 2023, our hotel acquisition in 2022 as well as the timing of collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties and settling with hotel managers.
Net Cash Flows Provided by (Used in) Investing Activities. For the nine months ended September 30, 2023, net cash flows used in investing activities were $65.9 million. Cash outflows consisted of $99.5 million for capital improvements made to various hotel properties, $402,000 of payments for franchise fees and $5.7 million from the issuance of a note receivable, partially offset by cash inflows of $18.2 million related to restricted cash received from initial consolidation of VIE, $1.8 million from property insurance proceeds and $5.3 million of proceeds from the payment of a note receivable.
For the nine months ended September 30, 2022, net cash flows used in investing activities were $28.3 million. Cash outflows primarily consisted of $68.1 million for capital improvements made to various hotel properties. Cash outflows were partially offset by cash inflows of $34.7 million from proceeds received from the sale of Sheraton Ann Arbor and six WorldQuest condominium units and $1.0 million of proceeds from property insurance and $4.0 million of proceeds from notes receivable.
Net Cash Flows Provided by (Used in) Financing Activities. For the nine months ended September 30, 2023, net cash flows used in financing activities were $172.2 million. Cash outflows primarily consisted of $342.9 million for repayments of indebtedness, $10.5 million for payments of loan costs and exit fees, $10.6 million of payments for preferred dividends and $22.3 million of payments for derivatives, partially offset by cash inflows of $101.7 million from borrowings on indebtedness, $60.1 million of net proceeds from preferred stock offerings, $5.2 million of contributions from noncontrolling interest in consolidating entities and $47.6 million from counterparty payments primarily comprised of $31.7 million from in-the-money interest rate caps and $16.1 million from sales of interest rate caps.
For the nine months ended September 30, 2022, net cash flows used in financing activities were $65.2 million. Cash outflows primarily consisted of $49.3 million for repayments of indebtedness, $2.3 million for payments of loan costs and exit
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fees, $9.3 million of payments for preferred dividends, $5.3 million of payments for derivatives, partially offset by $1.6 million of borrowings on indebtedness.
Dividend Policy. Distributions are authorized by our board of directors and declared by us based upon a variety of factors deemed relevant by our directors. The board of directors will continue to review our distribution policy on at least a quarterly basis. Our ability to pay distributions to our preferred or common stockholders will depend, in part, upon our receipt of distributions from our operating partnership. This, in turn, may depend upon receipt of lease payments with respect to our properties from indirect subsidiaries of our operating partnership, the management of our properties by our hotel managers and general business conditions. Distributions to our stockholders are generally taxable to our stockholders as ordinary income. However, since a portion of our investments are equity ownership interests in hotels, which result in depreciation and non-cash charges against our income, a portion of our distributions may constitute a non-taxable return of capital, to the extent of a stockholder’s tax basis in the stock. To the extent that it is consistent with maintaining our REIT status, we may maintain accumulated earnings of Ashford TRS in that entity.
On December 6, 2022, our board of directors reviewed and approved our 2023 dividend policy. We do not anticipate paying any dividends on our outstanding common stock for any quarter during 2023 and expect to pay dividends on our outstanding preferred stock during 2023. Declaration of dividends in 2023 on our preferred stock may require a determination by our board of directors, at the time of any determination, that the Company would continue to have positive equity on a fair value basis, among other considerations. Our board of directors will continue to review our dividend policy and make future announcements with respect thereto. We may incur indebtedness to meet distribution requirements imposed on REITs under the Code to the extent that working capital and cash flow from our investments are insufficient to fund required distributions. We may pay dividends in excess of our cash flow.
SEASONALITY
Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months, while certain other properties maintain higher occupancy rates during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as pandemics, extreme weather conditions, natural disasters, terrorist attacks or alerts, civil unrest, government shutdowns, airline strikes or reduced airline capacity, economic factors and other considerations affecting travel. To the extent that cash flows from operations are insufficient during any quarter to enable us to make quarterly distributions to maintain our REIT status due to temporary or seasonal fluctuations in lease revenue, we expect to utilize cash on hand, borrowings and common stock to fund required distributions. However, we cannot make any assurances that we will make distributions in the future.
CRITICAL ACCOUNTING POLICIES AND ESTIMA TES
The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in our 2022 Form 10-K. There have been no material changes in these critical accounting policies.
NON-GAAP FINANCIAL MEASURES
The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO are presented to help our investors evaluate our operating performance.
EBITDA is defined as net income (loss) before interest expense and amortization of discounts and loan costs, net, income taxes, depreciation and amortization, as adjusted to reflect only the Company’s portion of EBITDA of unconsolidated entities. In addition, we exclude gain/loss on consolidation of VIE and disposition of assets and gain/loss of unconsolidated entities to calculate EBITDAre, as defined by NAREIT.
We then further adjust EBITDAre to exclude certain additional items such as write-off of premiums, loan costs and exit fees, other income/expense, net, transaction and conversion costs, legal, advisory and settlement costs, advisory services incentive fee and stock/unit-based compensation and non-cash items such as amortization of unfavorable contract liabilities,
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realized and unrealized gains/losses on derivative instruments, as well as our portion of adjustments to EBITDAre of unconsolidated entities.
We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions. EBITDA, EBITDAre and Adjusted EBITDAre as calculated by us may not be comparable to EBITDA, EBITDAre and Adjusted EBITDAre reported by other companies that do not define EBITDA, EBITDAre and Adjusted EBITDAre exactly as we define the terms. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income (loss) or net income (loss) determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as an indicator of liquidity.
The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Net income (loss) | $ | (64,451) |  |  | $ | (22,323) |  |  | $ | (150,930) |  |  | $ | (84,371) |  |  |
Interest expense and amortization of discounts and loan costs | 99,380 |  |  | 61,023 |  |  | 270,485 |  |  | 152,975 |  |  |
Depreciation and amortization | 45,954 |  |  | 49,428 |  |  | 140,963 |  |  | 152,444 |  |
Income tax expense (benefit) | 127 |  |  | 4,657 |  |  | 2,410 |  |  | 10,340 |  |  |
Equity in (earnings) loss of unconsolidated entities | 138 |  |  | 147 |  |  | 715 |  |  | 451 |  |  |
Company’s portion of EBITDA of unconsolidated entities | 217 |  |  | (148) |  |  | 305 |  |  | (452) |  |  |
EBITDA | 81,365 |  |  | 92,784 |  |  | 263,948 |  |  | 231,387 |  |  |
(Gain) loss on consolidation of VIE and disposition of assets | (6,390) |  |  | 11 |  |  | (7,443) |  |  | (273) |  |  |
EBITDAre | 74,975 |  |  | 92,795 |  |  | 256,505 |  |  | 231,114 |  |  |
Amortization of unfavorable contract liabilities | (31) |  |  | 43 |  |  | 16 |  |  | 138 |  |  |
Transaction and conversion costs | 1,219 |  |  | (3,401) |  |  | 2,371 |  |  | (1,828) |  |  |
Write-off of premiums, loan costs and exit fees | 1,263 |  |  | 1,378 |  |  | 2,633 |  |  | 3,076 |  |  |
Realized and unrealized (gain) loss on derivatives | 2,678 |  |  | (9,774) |  |  | (4,490) |  |  | (19,059) |  |  |
Stock/unit-based compensation | 1,491 |  |  | 1,275 |  |  | 4,374 |  |  | 5,324 |  |  |
Legal, advisory and settlement costs | 911 |  |  | (96) |  |  | 911 |  |  | (59) |  |  |
Other (income) expense, net | (33) |  |  | (241) |  |  | (276) |  |  | (426) |  |  |
Dead deal costs | — |  |  | 76 |  |  | — |  |  | 356 |  |  |
Company’s portion of adjustments to EBITDAre of unconsolidated entities | — |  |  | 1 |  |  | 1 |  |  | 12 |  |  |
Adjusted EBITDAre | $ | 82,473 |  |  | $ | 82,056 |  |  | $ | 262,045 |  |  | $ | 218,648 |  |  |

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We calculate FFO and Adjusted FFO in the following table. FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to common stockholders, computed in accordance with GAAP, excluding gains or losses on consolidation of VIE and disposition of assets, plus depreciation and amortization of real estate assets, impairment charges on real estate assets, and after adjustments for unconsolidated entities and noncontrolling interests in the operating partnership. Adjustments for unconsolidated entities are calculated to reflect FFO on the same basis. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. Our calculation of Adjusted FFO excludes write-off of premiums, loan costs and exit fees, other income/expense, net, transaction and conversion costs, legal, advisory and settlement costs, stock/unit-based compensation and non-cash items such as deemed dividends on redeemable preferred stock, amortization of loan costs, amortization of credit facility exit fee, default interest and late fees, unrealized gains/losses on derivative instruments, as well as our portion of adjustments to FFO related to unconsolidated entities. We exclude items from Adjusted FFO that are either non-cash or are not part of our core operations in order to provide a period-over-period comparison of our operating results. We present FFO and Adjusted FFO because we consider FFO and Adjusted FFO important supplemental measures of our operational performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and Adjusted FFO when reporting their results. FFO and Adjusted FFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and Adjusted FFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and Adjusted FFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. We consider FFO and Adjusted FFO to be appropriate measures of our ongoing normalized operating performance as a REIT. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than we do. FFO and Adjusted FFO do not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income or loss as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity, nor is it indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO and Adjusted FFO should be considered along with our net income or loss and cash flows reported in the consolidated financial statements.
The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Net income (loss) | $ | (64,451) |  |  | $ | (22,323) |  |  | $ | (150,930) |  |  | $ | (84,371) |  |  |
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership | 889 |  |  | 231 |  |  | 1,838 |  |  | 679 |  |  |
Preferred dividends | (4,295) |  |  | (3,104) |  |  | (11,290) |  |  | (9,311) |  |  |
Deemed dividends on redeemable preferred stock | (760) |  |  | — |  |  | (1,993) |  |  | — |  |  |
Net income (loss) attributable to common stockholders | (68,617) |  |  | (25,196) |  |  | (162,375) |  |  | (93,003) |  |  |
Depreciation and amortization of real estate | 45,954 |  |  | 49,428 |  |  | 140,963 |  |  | 152,444 |  |  |
(Gain) loss on consolidation of VIE and disposition of assets | (6,390) |  |  | 11 |  |  | (7,443) |  |  | (273) |  |  |
Net income (loss) attributable to redeemable noncontrolling interests in operating partnership | (889) |  |  | (231) |  |  | (1,838) |  |  | (679) |  |  |
Equity in (earnings) loss of unconsolidated entities | 138 |  |  | 147 |  |  | 715 |  |  | 451 |  |  |
Company’s portion of FFO of unconsolidated entities | (10) |  |  | (148) |  |  | (364) |  |  | (452) |  |  |
FFO available to common stockholders and OP unitholders | (29,814) |  |  | 24,011 |  |  | (30,342) |  |  | 58,488 |  |  |
Deemed dividends on redeemable preferred stock | 760 |  |  | — |  |  | 1,993 |  |  | — |  |  |
Transaction and conversion costs | 1,219 |  |  | (3,401) |  |  | 2,371 |  |  | (1,828) |  |  |
Write-off of premiums, loan costs and exit fees | 1,263 |  |  | 1,378 |  |  | 2,633 |  |  | 3,076 |  |  |
Unrealized (gain) loss on derivatives | 12,908 |  |  | (9,774) |  |  | 27,233 |  |  | (19,059) |  |  |
Stock/unit-based compensation | 1,491 |  |  | 1,275 |  |  | 4,374 |  |  | 5,324 |  |  |
Legal, advisory and settlement costs | 911 |  |  | (96) |  |  | 911 |  |  | (59) |  |  |
Other (income) expense, net | (33) |  |  | (108) |  |  | (276) |  |  | (293) |  |  |
Amortization of term loan exit fee | 5,015 |  |  | 3,092 |  |  | 13,811 |  |  | 8,669 |  |  |
Amortization of loan costs | 3,249 |  |  | 2,512 |  |  | 9,634 |  |  | 7,314 |  |  |
Dead deal costs | — |  |  | 76 |  |  | — |  |  | 356 |  |  |
Default interest and late fees | 5,995 |  |  | — |  |  | 7,326 |  |  | — |  |  |
Company’s portion of adjustments to FFO of unconsolidated entities | — |  |  | 1 |  |  | 1 |  |  | 12 |  |  |
Adjusted FFO available to common stockholders and OP unitholders | $ | 2,964 |  |  | $ | 18,966 |  |  | $ | 39,669 |  |  | $ | 62,000 |  |  |

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HOTEL PORTFOLIO
The following table presents certain information related to our hotel properties as of September 30, 2023:

Hotel Property |  | Location |  | Service Type |  | Total Rooms |  | % Owned |  | Owned Rooms |  |  |  |  |  |
Fee Simple Properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Embassy Suites |  | Austin, TX |  | Full service |  | 150 |  | 100 |  |  | 150 |  |  |  |  |  |
Embassy Suites |  | Dallas, TX |  | Full service |  | 150 |  | 100 |  |  | 150 |  |  |  |  |  |
Embassy Suites |  | Herndon, VA |  | Full service |  | 150 |  | 100 |  |  | 150 |  |  |  |  |  |
Embassy Suites |  | Las Vegas, NV |  | Full service |  | 220 |  | 100 |  |  | 220 |  |  |  |  |  |
Embassy Suites |  | Flagstaff, AZ |  | Full service |  | 119 |  | 100 |  |  | 119 |  |  |  |  |  |
Embassy Suites |  | Houston, TX |  | Full service |  | 150 |  | 100 |  |  | 150 |  |  |  |  |  |
Embassy Suites |  | West Palm Beach, FL |  | Full service |  | 160 |  | 100 |  |  | 160 |  |  |  |  |  |
Embassy Suites |  | Philadelphia, PA |  | Full service |  | 263 |  | 100 |  |  | 263 |  |  |  |  |  |
Embassy Suites |  | Walnut Creek, CA |  | Full service |  | 249 |  | 100 |  |  | 249 |  |  |  |  |  |
Embassy Suites |  | Arlington, VA |  | Full service |  | 269 |  | 100 |  |  | 269 |  |  |  |  |  |
Embassy Suites |  | Portland, OR |  | Full service |  | 275 |  | 100 |  |  | 276 |  |  |  |  |  |
Embassy Suites |  | Santa Clara, CA |  | Full service |  | 258 |  | 100 |  |  | 258 |  |  |  |  |  |
Embassy Suites |  | Orlando, FL |  | Full service |  | 174 |  | 100 |  |  | 174 |  |  |  |  |  |
Hilton Garden Inn |  | Jacksonville, FL |  | Select service |  | 119 |  | 100 |  |  | 119 |  |  |  |  |  |
Hilton Garden Inn |  | Austin, TX |  | Select service |  | 254 |  | 100 |  |  | 254 |  |  |  |  |  |
Hilton Garden Inn |  | Baltimore, MD |  | Select service |  | 158 |  | 100 |  |  | 158 |  |  |  |  |  |
Hilton Garden Inn |  | Virginia Beach, VA |  | Select service |  | 176 |  | 100 |  |  | 176 |  |  |  |  |  |
Hilton |  | Houston, TX |  | Full service |  | 242 |  | 100 |  |  | 242 |  |  |  |  |  |
Hilton |  | St. Petersburg, FL |  | Full service |  | 333 |  | 100 |  |  | 333 |  |  |  |  |  |
Hilton |  | Santa Fe, NM |  | Full service |  | 158 |  | 100 |  |  | 158 |  |  |  |  |  |
Hilton |  | Bloomington, MN |  | Full service |  | 300 |  | 100 |  |  | 300 |  |  |  |  |  |
Hilton |  | Costa Mesa, CA |  | Full service |  | 486 |  | 100 |  |  | 486 |  |  |  |  |  |
Hilton |  | Boston, MA |  | Full service |  | 390 |  | 100 |  |  | 390 |  |  |  |  |  |
Hilton |  | Parsippany, NJ |  | Full service |  | 353 |  | 100 |  |  | 353 |  |  |  |  |  |
Hilton |  | Tampa, FL |  | Full service |  | 238 |  | 100 |  |  | 238 |  |  |  |  |  |
Hilton |  | Alexandria, VA |  | Full service |  | 252 |  | 100 |  |  | 252 |  |  |  |  |  |
Hilton |  | Santa Cruz, CA |  | Full service |  | 178 |  | 100 |  |  | 178 |  |  |  |  |  |
Hilton |  | Ft. Worth, TX |  | Full service |  | 294 |  | 100 |  |  | 294 |  |  |  |  |  |
Hampton Inn |  | Lawrenceville, GA |  | Select service |  | 85 |  | 100 |  |  | 85 |  |  |  |  |  |
Hampton Inn |  | Evansville, IN |  | Select service |  | 140 |  | 100 |  |  | 140 |  |  |  |  |  |
Hampton Inn |  | Parsippany, NJ |  | Select service |  | 152 |  | 100 |  |  | 152 |  |  |  |  |  |
Hampton Inn |  | Buford, GA |  | Select service |  | 92 |  | 100 |  |  | 92 |  |  |  |  |  |
Marriott |  | Beverly Hills, CA |  | Full service |  | 260 |  | 100 |  |  | 260 |  |  |  |  |  |
Marriott |  | Durham, NC |  | Full service |  | 225 |  | 100 |  |  | 225 |  |  |  |  |  |
Marriott |  | Arlington, VA |  | Full service |  | 701 |  | 100 |  |  | 701 |  |  |  |  |  |
Marriott |  | Bridgewater, NJ |  | Full service |  | 349 |  | 100 |  |  | 349 |  |  |  |  |  |
Marriott |  | Dallas, TX |  | Full service |  | 265 |  | 100 |  |  | 265 |  |  |  |  |  |
Marriott |  | Fremont, CA |  | Full service |  | 357 |  | 100 |  |  | 357 |  |  |  |  |  |
Marriott |  | Memphis, TN |  | Full service |  | 232 |  | 100 |  |  | 232 |  |  |  |  |  |
Marriott |  | Irving, TX |  | Full service |  | 499 |  | 100 |  |  | 499 |  |  |  |  |  |
Marriott |  | Omaha, NE |  | Full service |  | 300 |  | 100 |  |  | 300 |  |  |  |  |  |
Marriott |  | Sugarland, TX |  | Full service |  | 300 |  | 100 |  |  | 300 |  |  |  |  |  |
SpringHill Suites by Marriott |  | Baltimore, MD |  | Select service |  | 133 |  | 100 |  |  | 133 |  |  |  |  |  |
SpringHill Suites by Marriott |  | Kennesaw, GA |  | Select service |  | 90 |  | 100 |  |  | 90 |  |  |  |  |  |
SpringHill Suites by Marriott |  | Buford, GA |  | Select service |  | 97 |  | 100 |  |  | 97 |  |  |  |  |  |
SpringHill Suites by Marriott |  | Manhattan Beach, CA |  | Select service |  | 164 |  | 100 |  |  | 164 |  |  |  |  |  |
SpringHill Suites by Marriott |  | Plymouth Meeting, PA |  | Select service |  | 199 |  | 100 |  |  | 199 |  |  |  |  |  |
Fairfield Inn by Marriott |  | Kennesaw, GA |  | Select service |  | 86 |  | 100 |  |  | 86 |  |  |  |  |  |
Courtyard by Marriott |  | Bloomington, IN |  | Select service |  | 117 |  | 100 |  |  | 117 |  |  |  |  |  |
Courtyard by Marriott - Tremont |  | Boston, MA |  | Select service |  | 315 |  | 100 |  |  | 315 |  |  |  |  |  |
Courtyard by Marriott |  | Columbus, IN |  | Select service |  | 90 |  | 100 |  |  | 90 |  |  |  |  |  |
Courtyard by Marriott |  | Denver, CO |  | Select service |  | 202 |  | 100 |  |  | 202 |  |  |  |  |  |
Courtyard by Marriott |  | Gaithersburg, MD |  | Select service |  | 210 |  | 100 |  |  | 210 |  |  |  |  |  |
Courtyard by Marriott |  | Crystal City, VA |  | Select service |  | 272 |  | 100 |  |  | 272 |  |  |  |  |  |
Courtyard by Marriott |  | Overland Park, KS |  | Select service |  | 168 |  | 100 |  |  | 168 |  |  |  |  |  |
Courtyard by Marriott |  | Foothill Ranch, CA |  | Select service |  | 156 |  | 100 |  |  | 156 |  |  |  |  |  |

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Hotel Property |  | Location |  | Service Type |  | Total Rooms |  | % Owned |  | Owned Rooms |  |  |  |  |  |
Courtyard by Marriott |  | Alpharetta, GA |  | Select service |  | 154 |  | 100 |  |  | 154 |  |  |  |  |  |
Courtyard by Marriott |  | Oakland, CA |  | Select service |  | 156 |  | 100 |  |  | 156 |  |  |  |  |  |
Courtyard by Marriott |  | Scottsdale, AZ |  | Select service |  | 180 |  | 100 |  |  | 180 |  |  |  |  |  |
Courtyard by Marriott |  | Plano, TX |  | Select service |  | 153 |  | 100 |  |  | 153 |  |  |  |  |  |
Courtyard by Marriott |  | Newark, CA |  | Select service |  | 181 |  | 100 |  |  | 181 |  |  |  |  |  |
Courtyard by Marriott |  | Manchester, CT |  | Select service |  | 90 |  | 100 |  |  | 90 |  |  |  |  |  |
Courtyard by Marriott |  | Basking Ridge, NJ |  | Select service |  | 235 |  | 100 |  |  | 235 |  |  |  |  |  |
Marriott Residence Inn |  | Evansville, IN |  | Select service |  | 78 |  | 100 |  |  | 78 |  |  |  |  |  |
Marriott Residence Inn |  | Orlando, FL |  | Select service |  | 350 |  | 100 |  |  | 350 |  |  |  |  |  |
Marriott Residence Inn |  | Falls Church, VA |  | Select service |  | 159 |  | 100 |  |  | 159 |  |  |  |  |  |
Marriott Residence Inn |  | San Diego, CA |  | Select service |  | 150 |  | 100 |  |  | 150 |  |  |  |  |  |
Marriott Residence Inn |  | Salt Lake City, UT |  | Select service |  | 144 |  | 100 |  |  | 144 |  |  |  |  |  |
Marriott Residence Inn |  | Las Vegas, NV |  | Select service |  | 256 |  | 100 |  |  | 256 |  |  |  |  |  |
Marriott Residence Inn |  | Phoenix, AZ |  | Select service |  | 200 |  | 100 |  |  | 200 |  |  |  |  |  |
Marriott Residence Inn |  | Plano, TX |  | Select service |  | 126 |  | 100 |  |  | 126 |  |  |  |  |  |
Marriott Residence Inn |  | Newark, CA |  | Select service |  | 168 |  | 100 |  |  | 168 |  |  |  |  |  |
Marriott Residence Inn |  | Manchester, CT |  | Select service |  | 96 |  | 100 |  |  | 96 |  |  |  |  |  |
Marriott Residence Inn |  | Jacksonville, FL |  | Select service |  | 120 |  | 100 |  |  | 120 |  |  |  |  |  |
TownePlace Suites by Marriott |  | Manhattan Beach, CA |  | Select service |  | 143 |  | 100 |  |  | 143 |  |  |  |  |  |
One Ocean |  | Atlantic Beach, FL |  | Full service |  | 193 |  | 100 |  |  | 193 |  |  |  |  |  |
Sheraton Hotel |  | Langhorne, PA |  | Full service |  | 186 |  | 100 |  |  | 186 |  |  |  |  |  |
Sheraton Hotel |  | Minneapolis, MN |  | Full service |  | 220 |  | 100 |  |  | 220 |  |  |  |  |  |
Sheraton Hotel |  | Indianapolis, IN |  | Full service |  | 378 |  | 100 |  |  | 378 |  |  |  |  |  |
Sheraton Hotel |  | Anchorage, AK |  | Full service |  | 370 |  | 100 |  |  | 370 |  |  |  |  |  |
Sheraton Hotel |  | San Diego, CA |  | Full service |  | 260 |  | 100 |  |  | 260 |  |  |  |  |  |
Hyatt Regency |  | Coral Gables, FL |  | Full service |  | 254 |  | 100 |  |  | 254 |  |  |  |  |  |
Hyatt Regency |  | Hauppauge, NY |  | Full service |  | 358 |  | 100 |  |  | 358 |  |  |  |  |  |
Hyatt Regency |  | Savannah, GA |  | Full service |  | 351 |  | 100 |  |  | 351 |  |  |  |  |  |
Renaissance |  | Nashville, TN |  | Full service |  | 674 |  | 100 |  |  | 674 |  |  |  |  |  |
Annapolis Historic Inn |  | Annapolis, MD |  | Full service |  | 124 |  | 100 |  |  | 124 |  |  |  |  |  |
Lakeway Resort & Spa |  | Austin, TX |  | Full service |  | 168 |  | 100 |  |  | 168 |  |  |  |  |  |
Silversmith |  | Chicago, IL |  | Full service |  | 144 |  | 100 |  |  | 144 |  |  |  |  |  |
The Churchill |  | Washington, D.C. |  | Full service |  | 173 |  | 100 |  |  | 173 |  |  |  |  |  |
The Melrose |  | Washington, D.C. |  | Full service |  | 240 |  | 100 |  |  | 240 |  |  |  |  |  |
Le Pavillon (1) |  | New Orleans, LA |  | Full service |  | 226 |  | 100 |  |  | 226 |  |  |  |  |  |
The Ashton |  | Ft. Worth, TX |  | Full service |  | 39 |  | 100 |  |  | 39 |  |  |  |  |  |
Westin |  | Princeton, NJ |  | Full service |  | 296 |  | 100 |  |  | 296 |  |  |  |  |  |
W |  | Atlanta, GA |  | Full service |  | 237 |  | 100 |  |  | 237 |  |  |  |  |  |
Hotel Indigo |  | Atlanta, GA |  | Full service |  | 141 |  | 100 |  |  | 141 |  |  |  |  |  |
Ritz-Carlton |  | Atlanta, GA |  | Full service |  | 444 |  | 100 |  |  | 444 |  |  |  |  |  |
La Posada de Santa Fe |  | Santa Fe, NM |  | Full service |  | 157 |  | 100 |  |  | 157 |  |  |  |  |  |
Leasehold Properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Crowne Plaza (2) (3) |  | Key West, FL |  | Full service |  | 160 |  | 100 |  |  | 160 |  |  |  |  |  |
Renaissance (4) |  | Palm Springs, CA |  | Full service |  | 410 |  | 100 |  |  | 410 |  |  |  |  |  |
Hilton (5) |  | Marietta, GA |  | Full service |  | 200 |  | 100 |  |  | 200 |  |  |  |  |  |
Le Meridien (6) |  | Fort Worth, TX |  | Full service |  | 188 |  | 33 |  |  | 61 |  |  |  |  |  |
Total |  |  |  |  |  | 22,504 |  |  |  | 22,378 |  |  |  |  |  |

________
(1) The Company entered into a new franchise agreement with Marriott to convert the La Pavillon in New Orleans, Louisiana to an Autograph Collection property. The agreement with Marriott calls for the hotel to be converted to an Autograph property by April 1, 2024.
(2) The ground lease expires in 2084.
(3) The Company entered into a franchise agreement with Marriott to convert the Crowne Plaza La Concha Key West Hotel in Key West, Florida to an Autograph Collection property. The agreement with Marriott calls for the hotel to operate under Marriott White Label beginning on November 15, 2023 and to be converted to an Autograph property by April 1, 2025.
(4) The ground lease expires in 2059 with one 25-year extension option.
(5) The lease expires in 2054 and includes the lease of the land, hotel and conference center (including the building, improvements, furniture, fixtures and equipment).
(6) The lease expires in 2120 and includes the lease of the land and building. The property is under development.
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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.
At September 30, 2023, our total indebtedness of $3.6 billion included $3.3 billion of variable-rate debt. The impact on our results of operations of a 25-basis point change in interest rate on the outstanding balance of variable-rate debt at September 30, 2023 would be approximately $8.2 million per year. However, we currently have various interest rate caps in place that limit this exposure. Interest rate changes have no impact on the remaining $306.0 million of fixed-rate debt.
The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and assume no changes in our capital structure. As the information presented above includes only those exposures that existed at September 30, 2023, it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies in place at the time, and the related interest rates.
ITEM 4.CONTROLS AND PROCEDURES
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2023 (“Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms; and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects nine hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: (i) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (ii) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class; however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. The opt out period has been extended until such time that discovery has concluded. In May 2023 the trial court requested additional briefing from the parties to determine whether the case should be maintained, dismissed, or the class de-certified. The trial court set a due date of August 7, 2023 for the briefs. After submission of the briefs, the court requested that the parties submit stipulations for the court to rule upon. If this litigation goes to trial, we expect that the earliest the trial would occur is the last quarter of 2023, based on various extensions to which the parties have agreed. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time. As of September 30, 2023, no amounts have been accrued.
We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the Americans with Disability Act and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings,
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we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations, or cash flow.
During the quarter ended September 30, 2023, we had a cyber incident that resulted in the potential exposure of certain employee personal information. We have completed an investigation and have identified certain employee information may have been exposed, but we have not identified that any customer information was exposed. Systems have been substantially restored with minimal effect on certain hotel operations. We believe that we maintain a sufficient level of insurance coverage related to such events, and the related incremental costs incurred to date are immaterial. It is reasonably possible that the Company may incur additional costs related to the matter, but we are unable to predict with certainty the ultimate amount or range of potential loss. At this time, no litigation has been filed nor has any been threatened.
Our assessment may change depending upon the development of any current or future legal proceedings, and the final results of such legal proceedings cannot be predicted with certainty. If we ultimately do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.
ITEM 1A. RISK FACTORS
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. In addition to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, the following risk factor should be carefully considered in evaluating us and our business.
Our cash, cash equivalents and investments could be adversely affected if the financial institutions in which we hold our cash, cash equivalents and investments fail.
We regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) insurance limit. The FDIC took control and was appointed receiver of Silicon Valley Bank, New York Signature Bank and First Republic Bank on March 10, 2023, March 12, 2023 and May 1, 2023, respectively. The Company does not have any direct exposure to Silicon Valley Bank, New York Signature Bank or First Republic Bank. However, if other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer
The following table provides the information with respect to purchases and forfeitures of shares of our common stock during each of the months in the third quarter of 2023:

Period |  | Total Number of Shares Purchased |  | Average Price Paid Per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plan (1) |  | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan (1)
Common stock: |  |  |  |  |  |  |  |
July 1 to July 31 |  | — |  |  | $ | — |  |  | — |  |  | $ | 200,000 |
August 1 to August 31 |  | — |  |  | — |  |  | — |  |  | 200,000 |
September 1 to September 30 |  | — |  |  | — |  |  | — |  |  | 200,000 |
Total |  | — |  |  | $ | — |  |  | — |  |  |

____________________
(1)On April 6, 2022, the board of directors approved a stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock and preferred stock having an aggregate value of up to $200 million. The board of directors’ authorization replaced the previous repurchase authorization that the board of directors authorized in December 2017.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
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ITEM 4.MINE SAFETY DISCLOSURES
None.
ITEM 5.OTHER INFORMATION
Rule 10b5-1 Trading Agreements
During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading agreement” or “non-Rule 10b5-1 trading agreement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 6.EXHIBITS

Exhibit |  | Description
3.1 |  | Articles of Amendment and Restatement, as amended by Amendment Number One to Articles of Amendment and Restatement (incorporated by reference to Exhibit 4.6 to Registration Statement on Form S-3 filed May 15, 2015)
3.2 |  | Amendment Number Two to Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on May 22, 2017) (File No. 00131775)
3.3 |  | Articles of Amendment to the Company’s charter (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on July 1, 2020) (File No. 001-31775)
3.4 |  | Articles of Amendment to the Articles of Amendment and Restatement of the Company (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on July 16, 2021) (File No. 001-31775)
3.5 |  | Articles Supplementary, dated April 28, 2022 (incorporated by reference to Exhibit 4.10 to the Registrant’s Registration Statement on Form S-3, filed on April 29, 2022) (File No. 333-263323)
3.6 |  | Articles Supplementary establishing the Series J Preferred Stock, dated September 14, 2022 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on September 14, 2022) (File No. 333-263323)
3.7 |  | Articles Supplementary establishing the Series K Preferred Stock, dated September 14, 2022 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, filed on September 14, 2022) (File No. 333-263323)
3.8 |  | Second Amended and Restated Bylaws, as amended by Amendment No. 1 on October 26, 2014, by Amendment No. 2 on October 19, 2015, by Amendment No. 3 on August 2, 2016, by Amendment No. 4 on March 17, 2022, by Amendment No. 5 on February 23, 2023 and Amendment No. 6 on August 8, 2023, adopted on August 8, 2023 (incorporated by reference to Exhibit 3.8 to the Quarterly Report on Form 10-Q filed on August 9, 2023) (File No. 001-3 1775)
10.1 |  | Limited Waiver Under Advisory Agreement, dated as of March 2, 2023, by and among Ashford Hospitality Trust, Inc., Ashford Hospitality Limited Partnership, Ashford TRS Corporation, Ashford Inc. and Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed on March 3, 2023) (File No. 001-31775)
10.2 |  | Limited Waiver to Credit Agreement, dated as of March 2, 2023, by and among Ashford Hospitality Limited Partnership, Ashford Hospitality Trust, Inc., the guarantors party thereto, the Lenders party thereto and Oaktree Fund Administration, LLC, as administrative agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K, filed on March 3, 2023) (File No. 001-31775)
10.3 |  | Credit Agreement, dated as of January 15, 2021, by and among Ashford Hospitality Trust, Inc., Ashford Hospitality Limited Partnership, OPPS AHT Holdings, LLC, ROF8 AHT PT, LLC, Oaktree Phoenix Investment Fund AIF (Delaware), L.P., and Oaktree Fund Administration, LLC, as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed on January 15, 2021) (File No. 001-31775)
10.4 |  | Amendment No. 1 to Credit Agreement, dated as of October 12, 2021, by and among Ashford Hospitality Trust, Inc., Ashford Hospitality Limited Partnership, OPPS AHT Holdings, LLC, ROF8 AHT PT, LLC, The Lenders Phoenix Investment Fund AIF (Delaware), L.P., and Oaktree Fund Administration, LLC, as administrative agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K, filed on October 13, 2021) (File No. 001-31775)
10.5 |  | Amendment No. 2 to Credit Agreement, dated as of June 21, 2023, by and among Ashford Hospitality Trust, Inc., Ashford Hospitality Limited Partnership, OCM AHT Holdings, LLC, ROF8 AHT PT, LLC, Oaktree Phoenix Investment Fund AIF (Delaware), L.P., and Oaktree Fund Administration, LLC, as administrative agent (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on June 23, 2023) (File No. 001-31775)
10.6 |  | Investor Agreement, dated as of January 15, 2021, by and among Ashford Hospitality Trust, Inc., OPPS AHT Holdings, LLC and ROF8 AHT PT, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K, filed on January 15, 2021) (File No. 001-31775)
10.7 |  | Subordination and Non-Disturbance Agreement, dated as of January 15, 2021, by and among Oaktree Fund Administration, LLC as the Administrative Agent and collateral agent on behalf of the Lenders, Ashford Inc., Ashford Hospitality Advisors LLC, Ashford Hospitality Trust, Inc., Ashford Hospitality Limited Partnership, Ashford TRS Corporation, Remington Lodging & Hospitality, LLC, Premier Project Management, LLC and Lismore Capital II LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K, filed on January 15, 2021) (File No. 001-31775)
10.8 |  | Amendment No. 3 to the Ashford Hospitality Trust, Inc. 2021 Stock Incentive Plan (incorporated by reference to Annex B to the Company’s Proxy Statement on Schedule 14A, filed on March 28, 2023) (File No. 001-31775)
31.1* |  | Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

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Exhibit |  | Description
31.2* |  | Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1** |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2** |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 are formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements Comprehensive Income (Loss); (iv) Consolidated Statements of Equity (Deficit); (v) Consolidated Statements of Cash Flows; and (vi) Notes to the Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
101.INS |  | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document | Submitted electronically with this report.
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Submitted electronically with this report.
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document | Submitted electronically with this report.
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document. | Submitted electronically with this report.
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | Submitted electronically with this report.
104 |  | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |

___________________________________
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ASHFORD HOSPITALITY TRUST, INC.

Date: | November 8, 2023 | By: | /s/ J. ROBISON HAYS, III |
|  |  | J. Robison Hays, III |
|  |  | President and Chief Executive Officer |
Date: | November 8, 2023 | By: | /s/ DERIC S. EUBANKS |
|  |  | Deric S. Eubanks |
|  |  | Chief Financial Officer |

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