Related Party Transactions

We have management agreements with Remington Lodging, a related party, which is owned by our Chairman of our board of directors and Ashford Trust’s Chairman Emeritus. Under the agreements, we pay the related party a) monthly property management fees equal to the greater of $10,000 (CPI adjusted since 2003) or 3% of gross revenues as well as annual incentive management fees, if certain operational criteria are met, b) project management fees of up to 4% of project costs, c) market service fees including purchasing, design and construction management not to exceed 16.5% of project budget cumulatively, including project management fees, and d) other general and administrative expense reimbursements, approved by our independent directors, including accounting services. This related party allocates such charges to us based on various methodologies, including headcount and actual amounts incurred.

At December 31, 2016, Remington Lodging managed two of our eleven hotel properties and we incurred the following fees related to the management agreements with the related party (in thousands):



	Year Ended December 31,
	2016		2015		2014
Property management fees, including incentive property management fees	$	1,503	$	1,313	$	747
Market service and project management fees	2,453		1,645		1,126
Corporate general and administrative expenses	136		98		50
Total	$	4,092	$	3,056	$	1,923

Management agreements with Remington Lodging include exclusivity clauses that require us to engage Remington Lodging, unless our independent directors either (i) unanimously vote to hire a different manager or developer or (ii) by a majority vote elect not to engage Remington because either special circumstances exist such that it would be in our best interest not to engage Remington, or, based on Remington’s prior performance, it is believed that another manager or developer could perform the management, development or other duties materially better.

In connection with our spin-off, we entered into an advisory agreement with Ashford LLC, which was a subsidiary of Ashford Trust until November 12, 2014, when it spun off and became a subsidiary of Ashford Inc. Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor, and as a result, we pay advisory fees to Ashford LLC. We are required to pay Ashford LLC a quarterly base fee that is a percentage of our total market capitalization on a declining sliding scale plus the Key Money Asset Management Fee (defined in our advisory agreement as the aggregate gross asset value of all key money assets multiplied by 0.70%), subject to a minimum quarterly base fee, as payment for managing our day-to-day operations in accordance with our investment guidelines. We are also required to pay Ashford LLC an incentive fee that is based on our total return performance as compared to our peer group as well as to reimburse Ashford LLC for certain reimbursable overhead and internal audit, insurance claims 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 our officers and employees of Ashford LLC in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period.

On June 10, 2015, the independent directors of the Company approved an amended and restated advisory agreement with Ashford LLC, effective as of June 10, 2015. The amendments, among other things: permit the Company to engage an asset manager other than Ashford LLC with respect to any new properties acquired by the Company, if the Company and Ashford LLC determine that such property would be uneconomic to the Company without incentives; shorten the initial term of the advisory agreement to ten years; extend the renewal terms to five years; provide for key money investments by Ashford LLC to facilitate the Company’s acquisition of properties under certain conditions, including Ashford LLC becoming the asset manager for the acquired property and receiving related asset management and other fees, as applicable; adjust the base fee payable to Ashford LLC to a declining sliding scale percentage of total market capitalization of the Company above $6.0 billion; clarify the calculation of the termination fee; allow Ashford LLC to terminate the Advisory Agreement upon a Company Change of Control (as defined in the advisory agreement) and require the Company to pay a termination fee to Ashford LLC upon such termination; and grant Ashford LLC repurchase rights with respect to its shares held by the Company upon any termination of the advisory agreement. In connection with the agreement between Ashford Inc. and Remington Holdings to combine, on September 17, 2015, we entered into a letter agreement with Ashford Inc. approved by the independent directors of the Company to clarify that for purposes of determining the termination fee under the advisory agreement, Ashford LLC’s earnings shall exclude earnings arising under the master management agreement under which Remington Lodging may manage any of our hotel properties.

On January 24, 2017, the Company entered into an amended and restated advisory agreement. See note 24.

For the period from January 1, 2014 to November 11, 2014, we incurred advisory services fees to Ashford Trust. Beginning November 12, 2014, we incurred advisory services fees to Ashford Inc. The following table summarizes the advisory services fees incurred (in thousands):



	Year Ended December 31,
	2016		2015		2014
Advisory services fee
Base advisory fee	$	8,343	$	8,648	$	8,739
Reimbursable expenses ⁽¹⁾	2,798		1,827		1,690
Equity-based compensation ⁽²⁾	3,814		3,592		2,105
Incentive fee	—		3,822		—
	$	14,955	$	17,889	$	12,534

________


⁽¹⁾	Reimbursable expenses include overhead, internal audit, insurance claims advisory and asset management services.


⁽²⁾	Equity-based compensation is associated with equity grants of Ashford Prime’s common stock and LTIP units awarded to officers and employees of Ashford LLC.

At December 31, 2016 and 2015, we held a due from Ashford Trust OP, net of $488,000 and due to Ashford Trust OP, net, of $528,000, respectively, which are both associated with certain expenses. At December 31, 2016 and 2015, the balance in due to Ashford Inc., which is primarily associated with advisory services fee payable, was $5.1 million and $6.4 million, respectively. In addition, at December 31, 2016, we held a receivable from the AQUA U.S. Fund of $2.3 million, associated with the 5% hold back from the AQUA U.S. Fund.

Certain employees of Remington Lodging, who perform work on behalf of Ashford Prime, were granted approximately 21,000 and 1,000 shares of restricted stock under the Ashford Prime Stock Plan on April 1, 2016 and July 1, 2016, respectively. These share grants were accounted for under the applicable accounting guidance related to share-based payments granted to non-employees and are recorded as a component of “management fees” in our consolidated statements of operations. Expense of $71,000 and $0 was recognized for the years ended December 31, 2016 and 2015. The unamortized fair value of these grants was $213,000 as of December 31, 2016, which will be amortized over a period of 2.3 years.

On July 31, 2015, we entered into a block trade with an unaffiliated third party pursuant to a sale arrangement between the Company, Ashford Inc. and Ashford Trust. The block trade included the purchase from the third party of approximately 175,000 shares of Ashford Inc. common stock at a price of $95.00 per share, which approximated the 120-day volume weighted average price, for a total cost of approximately $16.6 million. The sale arrangement and block trade were evaluated and approved by the independent members of our board of directors. The block trade purchase price and other terms of the sale arrangement were the result of negotiations with the third party, and the board of directors received a fairness opinion from an independent financial advisor that the price paid for the Ashford Inc. shares by the Company was fair to the Company. We did not receive any concessions or economic benefits from Ashford Inc. pertaining to our current contractual arrangements with Ashford Inc. in connection with this block trade. The block trade settled on August 4, 2015, and the loss resulting from the block trade is recorded within “unrealized loss on investment in Ashford Inc.” in our consolidated statement of operations for the year ended December 31, 2015.

Subsequent to December 31, 2016, we reached a legal settlement with Sessa. See notes 13 and 24.