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5.5% Series B Cumulative Convertible Preferred Stock | 9 Months Ended
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Sep. 30, 2016
Temporary Equity Disclosure [Abstract] |
5.5% Series B Cumulative Convertible Preferred Stock | 5.5% Series B Cumulative Convertible Preferred Stock On June 9, 2015, we entered into a purchase agreement for the sale of 2.6 million shares of our 5.5% Series A Cumulative Convertible Preferred Stock (“Series A Preferred Stock”) to a financial institution, which resold the Series A Preferred Stock to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) at an initial offering price of $25.00 per share, with an aggregate underwriting discount of $1.5 million (net purchase price of $24.4125 per share). The net proceeds from the offering of the Series A Preferred Stock after the underwriting discount and other expenses were $62.2 million. On December 4, 2015, we entered into an agreement to exchange the 5.50% Series A Preferred Stock, par value $0.01 per share for an equal number of shares of our 5.50% Series B Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”). The terms and conditions of the Series B Preferred Stock are substantially similar to the Series A Preferred Stock for which it is being exchanged, except that, in contemplation of a public offering of the Series B Preferred Stock, either pursuant to the terms of the Series B Registration Rights Agreement or the Preemptive Rights Agreement, the Series B Preferred Stock contains certain customary anti-dilution provisions. Also in connection with the Exchange, the Company, together with Ashford Prime OP and Ashford LLC, entered into a registration rights agreement for the benefit of certain holders of the Series B Preferred Stock. Each share of Series B Preferred Stock is convertible at any time, at the option of the holder, into a number of whole shares of common stock at an initial conversion price of $18.90 (which represents an initial conversion rate of 1.3228 shares of our common stock, subject to certain adjustments). The Series B Preferred Stock is also subject to conversion upon certain events constituting a change of control. Holders of the Series B Preferred Stock have no voting rights, subject to certain exceptions. Commencing June 11, 2016, the Company may, at its option, cause the Series B Preferred Stock to be converted in whole or in part, on a pro-rata basis, into fully paid and nonassessable shares of the Company’s common stock at the conversion price, provided that the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110% of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion. In the event of such mandatory conversion, the Company shall pay holders of the Series B Preferred Stock any additional dividend payment to make the holder whole on dividends expected to be received through June 11, 2019, in an amount equal to the net present value, where the discount rate is the dividend rate on the Series B Preferred Stock, of the difference between (i) the annual dividend payments the holders of Series B Preferred Stock would have received in cash from the date of the mandatory conversion to June 11, 2019, and (ii) the common stock quarterly dividend payments the holders of Series B Preferred Stock would have received over the same time period had such holders held common stock. On April 26, 2016, in connection with a previously announced required public offering, we issued 290,850 shares of our Series B Preferred Stock at $17.24 per share for gross proceeds of $5.0 million. The Series B Preferred Stock offering includes accrued and unpaid dividends since April 15, 2016. Dividends on the Series B Preferred Stock will accrue at a rate of 5.50% on the liquidation preference of $25.00 per share. The offering closed on April 29, 2016. The net proceeds, after deducting underwriting discounts, advisory fees, commissions and other estimated offering expenses payable by the company, were approximately $4.2 million. At September 30, 2016, we had 2.9 million outstanding shares of Series B Preferred Stock. Due to certain redemption features that are not under our control, the Series B Preferred Stock is classified outside of permanent equity. The Series B Preferred Stock dividend for all issued and outstanding shares is set at $1.375 per annum per share. For the three and nine months ended September 30, 2016, we declared dividends of $994,000 and $2.9 million, respectively, with respect to shares of Series B Preferred Stock. For the three and nine months ended September 30, 2015, we declared dividends of $895,000 and $1.1 million with respect to shares of Series A Preferred Stock.

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