Indebtedness, net

9 Months Ended

Sep. 30, 2024

Indebtedness consisted of the following (in thousands):



Indebtedness	Collateral		Maturity	Interest Rate			September 30, 2024		December 31, 2023
Mortgage loan (2)	1	hotel	May 2024		4.99	%	$	—	$	5,613
Mortgage loan (3)	1	hotel	June 2024	SOFR(1) +	2.00	%	—		8,881
Mortgage loan (4)	2	hotels	August 2024		4.85	%	—		10,945
Mortgage loan (5)	1	hotel	November 2024	SOFR(1) +	4.76	%	86,000		86,000
Mortgage loan (6)	17	hotels	November 2024	SOFR(1) +	3.39	%	409,750		409,750
Mortgage loan (7)	1	hotel	December 2024	SOFR(1) +	4.00	%	37,000		37,000
Mortgage loan (8)	1	hotel	December 2024	SOFR(1) +	2.85	%	13,644		13,759
Mortgage loan (9)	2	hotels	February 2025		4.45	%	26,134		45,792
Mortgage loan (10)	8	hotels	February 2025	SOFR(1) +	3.28	%	335,000		345,000
Mortgage loan	1	hotel	March 2025		4.66	%	22,289		22,742
Mortgage loan (11)	2	hotels	March 2025	SOFR(1) +	2.80	%	—		240,000
Mortgage loan (12)	19	hotels	April 2025	SOFR(1) +	3.51	%	862,027		862,027
Mortgage loan (13)	4	hotels	June 2025	SOFR(1) +	4.03	%	143,877		143,877
Mortgage loan (14)	4	hotels	June 2025	SOFR(1) +	4.29	%	159,424		237,061
Mortgage loan (15)	5	hotels	June 2025	SOFR(1) +	3.02	%	109,473		119,003
Mortgage loan (16)	1	hotel	August 2025	SOFR(1) +	3.91	%	—		98,000
Term loan (17)	Equity		January 2026		14.00	%	84,386		183,082
Mortgage loan (18)	2	hotels	May 2026	SOFR(1) +	4.00	%	98,450		98,450
Mortgage loan (11)	1	hotel	May 2026	SOFR(1) +	3.98	%	267,200		—
Mortgage loan (19)	4	hotels	December 2028		8.51	%	30,200		30,200
Environmental loan (20)	1	hotel	April 2024		10.00	%	420		571
Bridge loan (20)	1	hotel	December 2024		7.75	%	20,828		19,889
TIF Loan (20)	1	hotel	August 2025		8.25	%	—		5,609
Construction loan (20)	1	hotel	May 2033		11.26	%	15,825		15,494











Total indebtedness							$	2,721,927	$	3,038,745
Premiums (discounts), net							313		(606)
Capitalized default interest and late charges							90		396
Deferred loan costs, net							(10,193)		(6,914)
Embedded debt derivative							22,400		23,696
Indebtedness, net							$	2,734,537	$	3,055,317

Indebtedness related to assets held for sale, net	1	hotel	February 2025		4.45	%	—		14,366

							$	2,734,537	$	3,040,951

_____________________________

(1) SOFR rates were 4.85% and 5.35% at September 30, 2024 and December 31, 2023, respectively.

(2) On May 30, 2024, we sold this property for $8.0 million.

(3) The asset securing the mortgage loan was disposed of on July 16, 2024. See note 5.

(4) On June 10, 2024, we sold the two properties securing this mortgage loan for $17.5 million. See note 5.

(5) This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions.

(6) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fifth one-year extension period began in November 2023.

(7) 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%.

(8) This loan has two one-year extension options, subject to satisfaction of certain conditions. The second one-year extension period began in December 2023.

(9) On March 6, 2024, we sold the Residence Inn Salt Lake City for $19.2 million. Proceeds from the sale were used to repay $19.0 million in principal. See note 5.

(10) This mortgage loan was amended in April 2024. Terms of the amendment included a $10.0 million paydown and added a sixth one-year extension options, subject to satisfaction of certain conditions. The fifth one-year extension period began in February 2024.

(11) On May 9, 2024, we entered into a new $267.2 million loan secured by Nashville Renaissance. The new mortgage loan is interest only and bears interest at the rate of SOFR + 3.98%, has a two-year initial term, and three one-year extension options, subject to satisfaction of certain conditions. The previous mortgage loan was secured by Nashville Renaissance and Westin Princeton. After the May 9, 2024 refinance, Westin Princeton is unencumbered.

(12) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fifth one-year extension period began in April 2024.

(13) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fifth one-year extension period began effective June 2024. In accordance with exercising the extension option, the variable interest rate changed from SOFR + 3.90% to SOFR + 4.03%.

(14) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fifth one-year extension period began in June 2024. In accordance with exercising the extension option, we repaid $11.4 million of principal and the variable interest rate changed from SOFR + 4.17% to SOFR + 4.29%. A portion of his mortgage loan relates to One Ocean Resort, which was sold on June 27, 2024, resulting in a $66.2 million paydown. See note 5.

(15) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The fifth one-year extension period began in June 2024. In accordance with exercising the extension the extension option, we repaid $9.5 million of principal and the variable interest rate changed from SOFR + 2.90% to SOFR + 3.02%.

(16) On April 9, 2024, we sold this property for $171.0 million. See note 5.

(17) On March 11, 2024, we amended this term loan. Terms of the amendment extended the current maturity date to January 2026.

(18) This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions.

(19) This loan is associated with Stirling OP. See discussion in notes 1 and 2.

(20) This loan is associated with 815 Commerce Managing Member, LLC. See discussion in notes 1, 2 and 8.

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	2024		2023		2024		2023
Interest expense and amortization of discounts and loan costs	$	(17)	$	(5,031)	$	(896)	$	(13,862)

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, 2024 was $54,000 and $298,000, respectively. For the three and nine months ended September 30, 2023, the amount of principal amortization was $1.7 million and $6.6 million, respectively. The amount of the capitalized principal that was written off during the three and nine months ended September 30, 2024 was $0 and $8,000, respectively. There was no write off during the three and nine months ended September 30, 2023. 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 Trust OP (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 (none of which was used as of December 31, 2023), 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.

On March 11, 2024, we entered into Amendment No. 3 to the Oaktree Credit Agreement which, among other items, (i) extends the Credit Agreement to January 15, 2026, (ii) removes the $50 million minimum cash requirement, (iii) removes the 3% increase in the interest rate if cash is below $100 million, (iv) removes the provision in which a default under mortgage indebtedness is a default under the Credit Agreement, (v) increases the interest rate by 3.5% if the principal balance is not less than $100 million as of September 30, 2024 or not fully repaid by March 31, 2025, (vi) terminates all “delayed draw” term loan commitments and the unused fees thereon, (vii) provides for a mandatory prepayment of the Credit Agreement at the end of each calendar quarter in the amount by which unrestricted cash exceeds $75 million for the first three quarters of 2024, $50 million for the fourth quarter of 2024, and $25 million for each quarter thereafter, (viii) provides for a mandatory prepayment of the Credit Agreement in an amount equal to 50% of all net proceeds raised from the issuance of equity, including non-traded preferred stock (increased to 100% of such net proceeds if the principal balance is not less than $100 million as of September 30, 2024 or not fully repaid by March 31, 2025), (ix) removes the option to pay the exit fee in the form of common stock warrants, (x) requires the exit fee to be paid in the form of a 15% cash exit fee (payable entirely in cash), which exit fee shall be reduced to 12.5% if the Oaktree Credit Agreement is repaid on or before September 30, 2024, (xi) requires the Company to use commercially reasonable efforts to sell fifteen specified hotels, (xii) if the principal balance is not less than $100 million as of September 30, 2024 or not fully repaid by March 31, 2025, requires the Company to sell eight specified hotels at a minimum sales price within six months, with the net sales proceeds to be applied as a prepayment of the Credit Agreement, (xiii) requires the Company to use commercially reasonable efforts to refinance the Renaissance Nashville hotel property, and (xiv) limits the Company’s ability to perform discretionary capital expenditures.

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.

On November 29, 2023, the Company completed the deed in lieu of foreclosure transaction for the transfer of ownership of the KEYS Pool F $215.1 million mortgage to the mortgage lender.

On March 1, 2024, the Company received notice that the hotel properties securing the KEYS Pool A and KEYS Pool B loans have been transferred to a court-appointed receiver. Below is a summary of the hotel properties securing the KEYS Pool A and Pool B 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

We derecognized the hotel properties securing the KEYS Pool A and KEYS Pool B loans from our consolidated balance sheet in March 2024, when the receiver took control of the hotel properties, and accordingly recognized a gain of $133.9 million, which is included in “gain (loss) on derecognition of assets” in our consolidated statements of operations and recorded a contract asset of $378.2 million, which represented the liabilities we expect to be released from upon final resolution with the lenders on the KEYS Pool A and KEYS Pool B mortgage loans in exchange for the transfer of ownership of the respective hotel properties.

During the three months ended June 30, 2024, we recognized an additional gain of $11.7 million, which is included in “gain (loss) on derecognition of assets” in our consolidated statements of operations that increased the contract asset by a corresponding amount. The additional gain primarily represents the additional accrued interest expense recorded during the three months ended June 30, 2024.

During the three months ended September 30, 2024, we recognized an additional gain of $11.1 million, which is included in “gain (loss) on derecognition of assets” in our consolidated statements of operations that increased the contract asset by a corresponding amount. The KEYS Pool A and the KEYS Pool B mortgage loans as well as all accrued and unpaid interest, default charges and late fees will remain liabilities until final resolution with the lenders is concluded, and thus is included in “indebtedness associated with hotels in receivership” and “accrued interest associated with hotels in receivership” on our consolidated balance sheets. On July 2, 2024, the Courtyard Plano Legacy Park and the Residence Inn Plano were foreclosed on at a public auction. As a result, the contract asset and corresponding indebtedness associated with hotels in receivership and accrued interest associated with hotels in receivership were reduced for the amounts attributable to each hotel.

In June 2024, the Company was informed by its lender that the lender intended to exercise remedies for the maturity default on the Ashton hotel in Fort Worth, Texas, which secures the Company’s $8.9 million mortgage loan. The Company and the lender agreed to a deed-in-lieu of foreclosure, which was completed on July 16, 2024.

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.

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, 2024, we were in compliance with all covenants related to mortgage loans, with the exception of the KEYS Pool A and KEYS Pool B 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 for the three and nine months ended September 30, 2024 $1.1 million and $3.7 million of capitalized interest. For the three and nine months ended September 30, 2023, the Company recorded $1.0 million and $1.6 million of capitalized interest. These amounts are included in “investment in hotel properties, net” in our consolidated balance sheet. See note 4. The hotel opened on August 29, 2024.